Young people are deciding they can't afford to have children, shrinking the pool of the next generation of taxpayers
Among the most extraordinary items in last week's better-than-expected data from the eurozone was the rip-roaring 1.1% growth in Portugal in the second quarter, marking the end of its second painful recession since 2008.
If this nascent upturn really does mean that the darkest hour is over for this beautiful country, it's great news. Yet the nature of the last-ditch, grudging bailouts offered to Portugal means – as with Greece, Cyprus and Ireland – that it will be left with a heavy burden to bear for years to come; and the scale of the crisis means it will have profound social and political consequences, perhaps for decades.
In its recent progress report on Portugal, the International Monetary Fund warned that, despite a decision by Portugal's troika of creditors to ease stringent deficit targets for the next two years, it is still not clear that the country's debt burden is manageable. "Sustainability cannot be asserted with high probability," it said, with typical bluntness.
That may yet mean a bruising battle over debt forgiveness, such as that already suffered by Greece; and with popular support for relentless austerity fading (as the IMF also pointed out), potentially a political crisis too.
Holidaying in the north of the country last week, the signs of distress were clearly visible, from the shuttered shops to the shabbily dressed middle-aged men whiling away afternoons on Porto's park benches.
In the elegant, down-at-heel port of Viana do Castelo, a 24-year-old man, with impeccable English, stopped to chat at the end of his shift waiting tables in a harbourside restaurant, and began to explain how the crisis had affected him and his family.
He had dropped out of his sports management degree because his family could not pay the fees for both him and his brother to study. He was contemplating leaving the intense sunshine of the Atlantic coast once his summer job ends, and migrating: first to Porto, the nearest big city, but if he can't find a job there to affluent Norway, whose talent-hungry firms have sent recruiters to local employment fairs. In Portugal, the unemployment rate is 17.4%; in Norway, it's 3.4%.
While his parents had settled down and had their first child by his age, he said, his financial situation made that impossible. Instead, he and his girlfriend will have to find permanent jobs, perhaps thousands of miles from home, before they can even think about starting a family.
He was resigned, philosophical, greeting the unfairness of his fate with a shrug, rather than the defiance evident in local graffiti that read: "Fuck the police, from Porto to Greece".
These are just holiday anecdotes; but the tale has been repeated many times, across many countries, over the past five years, as young people have struggled to build a life for themselves amid sky-high unemployment and savage spending cuts.
Perhaps it's not surprising that many have responded either by leaving their home country or delaying starting a family. Between 2010 and the start of this year, Portugal, Spain and Ireland had all lost around 2% of their working-age population as workers went abroad in search of a job.
As Marchel Alexandrovich of City broker Jefferies pointed out in a recent note, that will potentially have a long-term impact on these countries' economic viability – narrowing the pool of taxpayers to fund future public spending far beyond the immediate struggle of emerging from recession.
"In simple terms, a smaller population means a smaller potential tax base and, all things being equal, this implies that even when these economies return to 'full' employment, tax revenues will turn out to be less than were estimated before the recession started."
Free movement of labour is a basic tenet of the European Union; but, as Alexandrovich points out, it can mean struggling member countries paying to educate young people, only to see them disappear to Germany or France and pay taxes there instead.
Delaying the decision to start a family is another understandable, and well-documented, response to tough economic times. A recent article from Eurostat, the EU's number-crunching body, mused that Europe may be heading for a "baby recession". It finds a connection in a number of eurozone countries (not Portugal, as it happens), between the onset of recession in 2008-09 and falling birth rates.
Spain, Greece and Ireland have all seen a sharp reduction in birth rates since the onset of the crisis, as couples decide that a child is an expense they simply cannot afford. Meanwhile, ageing populations in a number of European countries already mean there are fewer women of child-bearing age. The combination of these two factors has resulted in declining birth rates among 24 of the 31 countries monitored by Eurostat between 2008 and 2011.
For some countries that appeared to have benefited most from membership of the euro-club in the boom years of the early noughties – not least Ireland – it was a badge of success that after decades of net emigration, talented young people were choosing to stay at home and seek their fortune. But the flow has now reversed. And that means, as Alexandrovich puts it, "even when the recession ends, the damage to some euro area countries will be more permanent than may be commonly recognised".
