Public perception of Southern and Eastern Europe is a field in which many interesting differences and commonalities can once again be observed. In the postwar period, negative views of Mediterranean societies and cultures faded away north of the Alps.22 The once-widespread derogatory stereotypes of Southern Europe had emerged around the same time as those of Eastern Europe. They were rooted in eighteenth-century, occidentalist, Enlightenment-based ideas of progress. Neoliberalism, with its orientation toward a specific model of historical development—in this case, liberal democracy combined with market economy—is also rooted in this tradition. In the light of their firm belief in progress, Enlightenment thinkers in the West began to reflect on the state of modernity, and contrast it against the supposed backwardness of some countries or wider regions of Europe. However, negative perceptions of Southern Europe have always been counterbalanced by Romantic admiration, as Goethe’s Italian Journey or William Turner’s paintings of Italy illustrate.
After the Second World War, views of Southern and Eastern Europe began to diverge. As Larry Wolff wrote in his important book Inventing Eastern Europe more than twenty years ago,23 the West’s existing negative stereotypes of Eastern Europe were reinforced during the Cold War era. The Soviet Union and the Eastern Bloc were perceived as threats. As a consequence, Russia’s place in Europe and (the homemade construct of) Western civilization was called into question. Even countries like Czechoslovakia were seen to fall within Eastern Europe (and therefore the subdiscipline of Eastern European history), although historically the Kingdom of Bohemia had far more in common with Austria or Germany than with Russia. Of course, prejudices against Eastern Europeans did not disappear when the Eastern Bloc crumbled. On the contrary, they were initially reinforced, as the rash of Polish jokes in circulation in Germany indicated.
Southern European countries were more positively perceived in the West because they were on the right side of the Iron Curtain. Pre–Cold War prejudices against the region were no longer mobilized by other Western countries. In 1955, West Germany concluded its first recruitment agreement with Italy, inviting migrant labor. Agreements followed with Spain, Greece, Turkey, and even one socialist country, Yugoslavia. Labor migration, along with the burgeoning tourist industry, facilitated intersocial encounters. Initially, this spawned new conflicts and prejudices (as the pioneer generation of Italian guest workers experienced to their dismay), but eventually, the various Western European nations grew accustomed to each other. The process was aided by gradual economic convergence: Spain, Portugal, and Greece became more affluent after the European Community’s expansion southward, like the countries of Eastern Europe in later years.
Since the crisis, this divergence has ended. The gulf between the South and the North (now including parts of the former East) of the “old” European Union has reemerged. Today “the South” is once again widely regarded as backward, poor, or reform-averse. The latter is an especially damning verdict in a neoliberal perspective. The pejorative acronym “PIIGS” was invented for the economically depressed Mediterranean EU countries. (The second “I” stood for Ireland, and was removed when that nation left the euro rescue plan.) In 2010, international investors and rating agencies employed PIGS to refer to Portugal, Italy, Greece, and Spain. Intentionally evoking disconcerting associations with the animal world, the acronym groups “the South” together as one large area, like the Eastern Bloc previously. Whether there is any factual basis for this blanket categorization is another matter. Even in terms of finance, the countries it referred to had disparate problems. Spain had exorbitantly high private household debt and a real-estate bubble; Italy’s most pressing problem was government debt. While Spain’s dependence on the construction sector puts a strain on the economy, Italy is struggling with a crisis in industry. As mentioned above, Greece is in many respects an exceptional case, and Portugal has different problems again. The latter was the only southern EU country to accept the reform program prescribed by the Troika (the trio made up of the EU Commission, the European Central Bank, and the IMF) largely without resistance.
Regardless of these differences, the countries labeled “PIGS” suddenly found themselves in one and the same semantic barnyard. Neither popularly perceived differences, especially between North and South, nor actual divergence are new to modern European history. But the decisive role of international actors (such as the authors of the acronyms) in creating a materialist mental map of Europe is new. As affluence has increased since 1989 in most of the new EU countries, and the South languishes under economic decline, a role reversal has taken place: The Mediterranean countries are now expected to make the kind of economic and cultural adjustments that were demanded of the EU candidate countries in the nineties. They are called on to rationalize their economies, be fiscally conservative, and, in principle, conform to a Protestant ethic. These demands point to an asymmetry of power extending beyond the sphere of economics.
The international response to Latvia’s post-2008 crisis management program illustrates the role reversal that has taken place. In the wake of the crash, the Latvian government acted as if it had already introduced the euro by pursuing a policy of “inner devaluation” rather than devaluing the national currency, the lats (which would have caused higher inflation and debt revaluation). While stabilizing the lats, it cut government employees’ salaries by an average 25 percent, slashed pensions and social security benefits, closed schools, and reduced hospital services to life-saving operations only. As a consequence of this unprecedented austerity program, economic output plummeted by almost 18 percent in 2009 alone and the population shrank by 9 percent by 2011.
From 2010, the GDP started to grow again—albeit from its drastically lowered level. In early 2013, the IMF president Christine Lagarde made an official visit to Riga to “celebrate Latvia’s achievements,” as she announced. Metaphorically patting herself and her organization on the back, she declared that the IMF was proud to have contributed to the Latvian “success story” with its rescue package. In late 2008 the monetary fund had granted assistance to the tune of $7.5 billion—an enormous sum for such a small country.24 Her choice of terminology, evoking Hollywood-style rags-to-riches dreams, demonstrates neoliberalism’s discursive power. The media sent news of the Latvian success story across the globe (as it had the Polish and Chilean success stories25), with coverage appearing in all the major German newspapers as well as the New York Times and the international business press. The German business daily Handelsblatt headed its article with a paraphrase of a GDR propaganda slogan about the Soviet Union: “Learning from Latvia Means Learning Victory” (“Von Lettland lernen, heißt siegen lernen,” originally “Von der Sowjetunion lernen, heißt siegen lernen”).26 The unprecedented wave of emigrations in the wake of the crisis was not mentioned in any of the articles.
Latvia’s economic triumph raised the international pressure on Greece to follow suit, as Christine Lagarde, among others, demanded. But a repetition of the Latvian scenario would have triggered the migration of a large section of the Greek population. If this occurred at the same rate as in Latvia since 2009, several hundred thousand Greeks would have to be absorbed into other EU countries. If the Italians and Spanish became as mobile as the Romanians, the handful of EU countries with robust economies would have to accommodate over three million Italian and two million Spanish jobseekers. These figures are, of course, hypothetical.27 They are merely intended to illustrate the fact that a standard formula for dealing with crises in all countries alike is surely not a recipe for success.
The experts’ praise of Eastern European reform countries and criticism of the southern EU member states, especially Greece, is symptomatic of a long-term shift in the mental map of Europe. The East-West axis is being replaced by a North-South divide, both in terms of how the European Union sees itself and how it is seen from outside. This reconfiguration was caused partly by the economic changes discussed above, but is also self-reinforcing. Cultural stereotypes have always influenced economic decisions. Foreign direct investments in Poland are increasing not least because the country is no longer perceived as part of backward Eastern Europe.
In summary, the countries of East Central Europe have managed to overcome a number of prejudices in the last twenty-five years. The best example is the change in meaning of the term “Polish economy.” Once used by German nationalists as a byword for disorder, poverty, and backwardness, today it stands for prosperity based on initiative and industry. Southern Europe, in contrast, has returned to its starting point of around 1960, before the period of economic and social convergence that lasted three decades.28
The younger generation feels the decline the most. People under age thirty-five in Italy earned an average 540 euros taxable income per month in 2013.29 Even if one does not factor in the unemployed in this age group, the work income of young Italians falls below the minimum social welfare payment in Germany or Austria, including housing allowance. And the cost of living is higher in Italy than in Germany. No comparable statistics on Poland were available at the time of writing, but Poles under thirty-five certainly earned more than 540 euros per month, adjusted to purchasing power; at least those living in growth centers such as Warsaw, Poznań, or Wrocław. Italy’s pitifully low wages and trend toward temporary employment contracts have forced even working members of the younger generation to live with their parents. Even a room in a shared apartment is too expensive for many. While a certain attitude of complacency among the mammoni (male adults living with their parents) might be a contributing factor, independent living is precluded by the financial circumstances. Interestingly, there is no female equivalent of mammoni, perhaps indicating that daughters show greater determination to leave home. High rents also inhibit mobility in Poland, Slovakia, and the other new EU countries (and increasingly in Germany), but more living space is available now than in the nineties due to the construction boom of the last twenty years.
Despite the crisis, plenty of Italian teenagers and twenty-somethings can be seen driving sports cars, wearing designer clothes, and carrying the latest iPhones. They seem exempt from austerity. Their elevated social status is not a result of their own hard work, or an indication of high qualifications. Wealth in Italy is usually inherited—the offspring of wealthy families can still live off the fat of the land. Social inequality is perpetuated by the Italian tax system: employment income is taxed moderately, as in Germany and Austria, consumer items at a much higher rate, but inheritance and wealth hardly at all (similar to the United States). In a parallel to the employment situation, those from secure backgrounds can expect to remain comfortable, and probably have more than enough to live on. Those from poorer backgrounds, who do not have a permanent employment contract or who move to another town to seek work, struggle to make ends meet.
The Italians speak of “not arriving at the end of the month” (“non arrivare a fine mese”). Surveys have shown that 30 percent of Italians do not earn enough to live on; 37 percent have to ask their parents for support; 14 percent turn to other relatives for help and 8 percent to friends. (Interviewees were able to give several answers.) Only 45 percent of Italians earn more than they spend and are able to save some money over the year.30 The situation in Greece is even worse. There, a third of the population no longer has health insurance and ekes out a living on the poverty line.
These statistics show once again that the neoliberal order weakens the very social resources it depends upon. Lower incomes, rising unemployment, and reduced social benefits inhibit the mobility and flexibility of people in Southern Europe. At the same time, social, generational, and regional inequality has grown. The situation calls for a reform package extending beyond the ten points of the Washington Consensus or the current IMF programs. But so far none has been forthcoming. Italy’s government of experts under Mario Monti (prime minister 2011–13) evidently realized that liberalization and deregulation could only cause superficial adjustments and would not solve any fundamental problems. (There was not much left to privatize as most state enterprises had already been sold.) The poor record of this proreform governo tecnico raises the question of whether European welfare states can be reformed at all when their troubles are as deep-rooted as Italy’s. Perhaps gradual reforms are as difficult to accomplish in existing state systems as they were in the Eastern Bloc in the eighties.
Recent developments in Greece hint that this might be true. None of the three (socialist, technocrat, or conservative-led) governments in power between the outbreak of the crisis and the elections of January 2015 managed to convince the Greek public that the reforms were the right way to go. This is astounding considering that Greece’s bloated apparatus of state was so inefficient it even failed to gather regular taxes. But all the governments were reluctant to introduce more fundamental reforms, as they would have hit their major clientele of civil servants. For this reason, they did not venture beyond austerity measures, which further depressed the already declining economy.
The Greek economy’s sustained downward spiral unleashed a fatal political dynamic. Even the pre-2015 conservative government had shown a tendency to blame foreign creditors for the austerity choking the country. The left-wing populist Syriza party was even more inclined to mobilize images of bogeymen. It painted a picture of Angela Merkel, the European Union, and the IMF as a kind of demonic triumvirate, which it promised to fight by deflecting the austerity measures. The party’s charismatic leader, Alexis Tsipras, won the elections of January 2015 on the back of this argument. Instead of forming a coalition with the moderate Socialists, Syriza joined forces with the right-wing populists, shifting the political contest even further into the populist corner. Negotiations with the international creditors were therefore ill-fated from the start. After months of wrangling, Syriza broke off negotiations in July 2015 and called a referendum on further reforms and “rescue packages.” The populace unsurprisingly voted against them. But as banks closed and the Greek economy teetered on the brink of collapse, Athens was compelled to return to the negotiating table and ultimately accept even more drastic austerity measures and inroads into its national sovereignty. It is not, then, a very promising new start. The tax increases enacted in summer 2015 will further dampen economic growth. The fifty billion euros projected to be made by the Greek trust fund agency charged with selling the companies to be privatized is probably just a pipe-dream, if the history of the German Treuhand trust agency is anything to go by. After five years of economic depression, the mood among the population is at rock bottom. It is certainly not a good investment climate. But perhaps the statistical effect that has helped economies in the past will work again: having shrunk since 2010 by around 35 percent, at one point the Greek economy must surely rebound.
It is still too early to judge the Greek tragedy in a historical perspective. One day historians will analyze it as a case of failed modernization within the EU, as in all the years since it joined the European Community in 1981, Greece evidently failed to establish sustainable economic structures or a functioning apparatus of state. In the midterm, the tragedy was caused by the ineffectiveness of the old political elites and parties. A short-term reason for the continuing crisis was the combination of Syriza’s hubris and inexperience with the lack of creativity shown by the international finance organizations and the European Union, along with its unofficial leader, Angela Merkel. Apart from proposing ever more austerity measures, Brussels and the IMF had few ideas or visions on how to strengthen the Greek economy. In the midst of the depression, purposeful investment (in, for instance, solar power) might have created hope and jobs.
Perhaps Greece would indeed benefit from a new start, like Eastern Europe after the revolutions of 1989. But Poland and the other former Eastern Bloc countries had the advantage that their old systems had become defunct. This made it possible to break up traditional structures and start afresh in many areas. One example is university education. Salaries at state universities and the Polish Academy of Sciences were so low in the early nineties that scholars were forced to find other sources of income. As a result, they founded private colleges, offered private courses of study, or became involved in extraoccupational courses offered at the university. Thanks to this burst of initiative twenty-five years ago, Warsaw today has a highly diverse and dynamic academic landscape.
Furthermore, the regime change prompted Poland’s international creditors to make financial concessions. Poland had accumulated foreign debt worth 75.9 percent of the GDP by 1990. With only weak exports, it was incapable of paying it all back. In 1991, half of these debts were deferred or cancelled—for mostly political reasons. Poland was the key state in the Soviet Union’s outer sphere of influence. The West could not allow the reforms there to fail, at least not on account of communist-era loans. Compared to Poland twenty-five years ago, the Southern European countries are even deeper in debt. Italy, a key state of the European Union, currently has debts worth over 130 percent of its GDP. Unlike Poland in the early nineties, only some 20 percent are foreign debts. Superficially this seems a relative advantage.31 But Italy’s large domestic debt is not any easier to relieve if prohibitive losses for domestic banks and government bond holders are to be avoided.
The comparison of debt levels raises the hypothetical question of how a country like Italy might develop if it followed the IMF’s recommendations and passed an extensive neoliberal reform program. Italian companies might invest more in the domestic market again (unlike the postcommunist countries, Italy does not suffer from a shortage of capital). Foreign investors’ interest might also be stimulated. Italy is a large market with an educated population and moderate labor costs. Investors would be delighted by the Italian work ethic: unlike in Germany or Austria, plumbers and car mechanics do not resolutely hang up their overalls on Friday afternoon not to return until Monday morning. The bella figura principle applies not only to clothing but also to personal conduct; appearing moody and uncooperative is unacceptable. The traditional principle of volontà—readiness to help—is still an important factor in the national culture, and distinguishes Italy from the postcommunist fustiness that societies are still struggling to banish. In some respects, then, Italy is better poised to end the crisis than Eastern Europe was in the early nineties.
But even if Italy underwent a “mighty, magnificent modernization” as Poland did (in the words of the respected Catholic weekly Tygodnik Powszechny32), one may presume that only a few growth centers and social groups would benefit. Following the Eastern European pattern, the South and other regions plagued by weak infrastructure would hardly profit, or only in the very long term. The postcommunist countries enticed investors with sweeping tax exemptions. It would be difficult for a country such as Italy, which is shouldering a huge burden of public debt, to do the same.
Without inspired political and social vision, efforts to reform Italy according to neoliberal principles have had little impact. Although the technocratic government under Mario Monti managed to identify a number of shortcomings of the existing system—for instance, the taxi business is characterized by mediocre to bad service and high, seemingly arbitrary prices, another problem familiar to the United States—and convey the necessity of emergency measures, it failed to create any promising prospects for the future. Perhaps the reform politicians’ arguments would have been more convincing if they had been more radical. In 2013, the IMF published a paper advancing the idea of a 10 percent property tax to deal with the debt crisis. The proposal sparked a debate in Germany.33 But in Italy, the same discussion was soon stifled. Liberals and Social Democrats did not want to risk antagonizing a large part of society and their own voters. The status quo may be unjust and even untenable in the long term but the social majority is still comfortable with it.
In contrast, reform politicians in Eastern Europe twenty-five years ago addressed publics who were aware of the pitfalls and dysfunctionality of the old systems. In addition, they identified three important goals to work toward: the introduction of market economy (amid fierce debates over which variation); the consolidation of democracy, despite a popular lack of identification with the new system and reluctance to participate in elections; and accession to the European Union. The conditions for generating wealth were good: they had human capital and international support, the global economy was growing, and peace prevailed. These conditions cannot be created artificially more than twenty-five years later. The crisis-torn countries in the South of the European Union are already integrated into Europe and democratically governed and have market economies. The South is, then, not the new East, even though it is increasingly perceived as such.