European economic recession: A slowdown without end?

Driving on a Monday through the roads of downtown Nicosia, Cyprus, one is bewildered by the sparse traffic and empty roads. "Hey where are all the people?" I ask my taxi driver. "The traffic is less as businesses are shutting down and there is little reason for the people to be on the road", he says sadly. South Asians cannot think of a world without people so used to as they are of crowds and big crowds going somewhere or just nowhere. Hence Nicosia surprises.

Archbishop Makarious Street is Nicosia's main business and shopping area. Ever since the contagion of slowdown hit this East Mediterranean Sea's largest island a few years ago, the Makarious Street has been impacted rather hard. Businesses are closing down. Nearly, every third shop seems to have shuttered down. And those that are still open are giving hefty discounts to attract footfalls. Recently, one of the Debenhams stores in downtown Nicosia organized an end of shop sale. Many of the goods were on sale at throw away prices. The economy is going through a major shakeup and the major worry for the government here is the bailout and at what cost will it come.

A pall of fear hangs over Cyprus about its future. A country that enjoyed an above average per capita income than EU countries is being told by the Germans to clean up its act and stop being a money laundering haven for Russian mafia money and others. Cyprus is indignant over this allegation and mentions the OECD report that shows that the country has complied on many money laundering steps, better than other countries of Europe. Needless to say Germans, who have been given the mandate to sort out the problems of a common currency, and Europe's cash strapped economy, are shaping the continent according to their concerns and politics. They reportedly want to neuter the influence of Russians in this Mediterranean Island.

It is claimed that Russian funds were parked in Cyprus banks, which lost heavily due to their investments in the ill starred Greek economy. Greater pressure on Cyprus on the issue of money laundering was to hurt Russia more with whom Germany has a bone to pick on the issue of gas supplies and influence. At the time when the Cyprus economy crumbling, such power games do not really amuse the Cypriots, who remain distressed by the partition of their scenic island and the annoying presence of the Turkish Cypriots in the northern side.

The bailout of Cyprus works out to be Euro 17 billion, which many economists believe is too large for a country of its size to repay. Besides elections stare the country with the prospects of ruling Akel party to return to power extremely dim. When the right wing challenger comes to power then some rapid privatization of state controlled enterprises may follow. Till that happens many Cypriots are leaving the country and looking for fresh pastures. As it is an old British colony, some of those who lost their work or businesses are looking at troubled Great Britain or Australia. A person who ran a daily provision store told my host that he was closing his business and relocating to London. My driver told me that many of his friends had shifted to Greece. Although I visited Greece during the off-season, but many of the resorts resembled ghost towns and the few establishments that were open were unsure when the people will return. "Normally the season begins in April, but this time around we just do not know when it is going to happen. Till the turnaround in the fortunes in Europe takes place there will not be many tourists coming into this inviting island.

In neighbouring Greece, the slowdown is visible in a different way. In capital Athens, which forged the European civilization so many thousands of years ago and gave the world the meaning of democracy, there are every day protest against the austerity measures of the government. Syntagma Square opposite the Greek parliament is usually the venue of these protests. The day I landed in Athens the Metro workers and doctors were on strike. However, this strike did not impact the markets or the streets that were full of people. Many department stores like Attica were getting plenty of footfalls due to attractive sale that was announced on every product. Other shops, too, were giving hefty discounts on their merchandise. An impression that things were getting better could be quite illusory.

Greece has seen manufacturing plummet continuously for 61 months and that means people losing jobs. The unemployment rate has climbed to 27 percent from the normal range of about 11 percent. Young are the worst hit. While walking near the Syntagma square a handsome young man walked up to me and spoke in good English whether he could have some money for dinner. He did not fit the stereotype of a beggar, whom one can find many in European streets. It was quite clear that the economic crisis was hitting the middle class hard. Families are splitting up as husbands lose their jobs. There are well documented articles on the spurt in suicide rates. The pain and misery of the austerity drive is just unravelling the Greek society. It is not that Greek as a civilization has not faced adversity, but what is happening now is totally unexpected. No one was really prepared that the downturn could mean so much pain.

Although the International Monetary Fund (IMF) is regretting its austerity policies claiming that it had not expected so much distress in places like Greece, clearly the harm has been done.

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Sanjay Kapoor is the Editor of Delhi based Hardnews Magazine (www.hardnewsmedia.com). Hardnews is also the South Asian partner of Paris based publication, Le Monde Diplomatique.