ABSTRACT
Origins and impacts of the crisis The current socio-economic crisis has its origins in multiple events of the preceding decades and is manifested in a series of socio-political and socio-spatial impacts. Many of the authors in this volume have sought to trace the various causes of the crisis and to provide an in-depth study of its manifold impacts in selected Southern European cities and urban regions. This allows for a comparative analysis of recent developments as well as the identification of challenges for the years ahead. According to Chuliá, Guillen, and Santolino (in this volume) the current financial system is among the reasons for the financial and economic crisis as it allows the creation of bubbles based on speculative transactions and unrealistic expectations. Additionally, the high level of risk-taking of banks and investors has been fostered through a long period of low inflation and stable growth in most industrialised countries, including Southern European states. An example for this can be found in the irresponsible mortgage lending in the US but also in many European countries such as the UK, Ireland or Spain, Portugal, and Greece. Here, loans were distributed to ‘subprime’ borrowers with poor creditworthiness for building or buying houses who then struggled to repay the loans. When looking at the situation in the US, the distribution of loans was not a single event but happened in all parts of the country. It led to the burst of the real estate bubble in the country, the collapse of the investment bank Lehmann Brothers, and to far-reaching consequences for the global financial systems. The impacts of the global financial crisis have also reached Europe and have hit Southern European countries and cities particularly hard. There seem to exist various reasons for this (see the contributions of Chuliá, Guillen, & Santolino; Romero, Melo, & Brandis; Seixas et al.; Serraos et al. in this volume). First, the long period of low inflation and stable growth in most European countries, together with the introduction of the euro as a currency, has raised capital flows from the North-western European countries to the Southern European ones and has provoked the current account deficits of the latter. As argued by Chuliá, Guillen, and Santolino (in this volume) this has resulted in a credit boom in the banking sector that has created jobs in low-skilled industries, such as the
construction sector (see also the contributions of Mourão & Marat-Mendes; Rodrigez Álvarez; Romero, Melo, & Brandis; Seixas et al.). This development already indicates that the economies of most of the Southern European countries are highly specialised in sectors with low productivity and high employment. In Spain and Portugal, for example, the financial industry has been strongly focused on the housing business as a strategy for growth (see for instance contributions of Chuliá, Guillen, & Santolino; Rodrigez Álvarez; Mourão & MaratMendes; Romero, Melo, & Brandis, in this volume). According to Chuliá, Guillen, and Santolino, banks provided cheap mortgage loans to investors and house purchasers, inflating house prices. As a consequence, and due to the lack of suitable policies and spatial plans or strategies in most Southern European countries to stricter control urban development, the built land and the number of housing plots has expanded enormously in the two decades preceding the outbreak of the crisis. This has provided the construction sector a possibility to increase rapidly producing a large housing stock surplus (see for instance contribution of Mourão & Marat-Mendes). The house price bubble has not been anticipated by policy-makers, and countermeasures have not been launched. ‘Even worse, tax deductions were applied to the purchase of a property, inflating the bubble’ (Chuliá, Guillen, & Santolino, this volume). The favourable loans granted by banks and the economic specialisation in sectors with low productivity and high employment are thus among the main reasons for the crisis in Southern European countries and might help explain the housing bubble and its eruption. Another reason for the crisis or the strong impacts of the crisis on Southern European countries is to be found in the socially deeply embedded ambition of Southern Europeans of purchasing their own property (see Cotella et al., this volume). Due to the capital flows banks have also granted generous loans to households and borrowers with poor creditworthiness to finance housing projects. Additionally, people borrowed against overvalued houses (see Chuliá, Guillen, & Santolino, in this volume, for instance). Similar as in the US, the economic crisis, the subsequent economic contraction and the increasing unemployment rates, foreclosures, and mortgage insolvencies resulting from it have faced individuals, households, and families with difficulties repaying their loans and have thus additionally intensified the crisis. However, it is not only the housing bubble that has led to the economic crisis in Southern European countries. Serraos et al. (in this volume) conclude that the crisis in Greece, for example, emerges as a consequence of the massive budget deficit and the simultaneous inability of the state to attract further external finances. They further argue that the economic growth and prosperity of the last decades were based on increases in government expenditures and debt-fuelling government spending, mainly based on the above mentioned capital flows from North Europe. When capital flows suddenly stopped, due to the overall crisis, this led to major imbalances between state expenses and financing abilities as well as between borrowing and repayment abilities. In addition, many authors in this volume (see for instance Mourão & MaratMendes; Seixas et al.; Papaioannou & Nikolakopoulou) have emphasised that
the economic crisis has also been triggered by pre-crisis urban developments. The neoliberal policies and models followed in the last decades have promoted territorial competitiveness, outsourcing of public services, and privatisation of public space. The different national strands of neoliberalisation in Southern European countries have created conditions that favour large-scale events and projects, the planning by projects and not by plans, and the undermining of participatory processes (see Romero, Melo, & Brandis; Caruso, Cotella, & Pede; Seixas et al., in this volume, for instance). Furthermore, as various examples highlight (e.g. Papaioannou & Nikolakopoulou; Seixas et al.; Rodrigez Álvarez), the Southern European context is characterised by institutional particularities and the existence of internal factors, such as the mistrust in public institutions and corruption, that influence the development paths of the countries but also their ability to enforce and implement targeted policies to mitigate the impacts of the crisis. As argued by Papaioannou and Nikolakopoulou, Greece for instance has experienced decades of short-term policies and plans that have not been focusing on real local needs. This shows that along with the economic crisis, Southern European cities witness also a crisis of territorial governance and of traditional tools. It could be concluded that the financial crisis, the economic downturn as a result of it, and the austerity politics promoted in response to the financial deficits have had widespread impacts on the territories and societies in Southern Europe. Both developed and less developed cities and regions have experienced a decline in employment and in economic output and have been strongly affected by the shrinking GDP and the increasing public debt. Yet, the stagnation of the real estate property market and the contraction of the building sector have been higher in certain urban and Metropolitan Areas such as Madrid and Athens as well as in coastal areas strongly focused on the tourism industry and dependent on the construction sector. This might result in new patterns of regional polarisation and brings the discussion to the fore why some cities are more resilient to crisis events, why others deal better with the crisis’ impacts, and what factors could mitigate these impacts. The economic contractions from the last years, the explosive increase in unemployment, and the daily evictions have created hardship for millions of people. As shown in many of the contributions in this volume this has led to a significant increase in the number of people at risk of poverty and exclusion as well as to the re-emergence of low living standards (see for instance Papaioannou & Nikolakopoulou; Serraos et al.; Romero, Melo, & Brandis; Chuliá, Guillen, & Santolino). Many authors have also documented that the crisis has severely affected exactly the most vulnerable groups of the population. Rodrigez Álvarez (in this volume) even points to the emergence of two lost generations due to the crisis – the young people that are unable to enter the labour market and the elderly ones that are excluded with limited chances for reintegration. In addition, the crisis has affected the different economic sectors unequally leading to highest percentage of job losses in the construction, real estate, and tourism sectors. The shrinking of the economy, the rising inequalities in income distribution, and the threat of social segregation have resulted in change in the concerns
of people and in lack of confidence in the future. As a consequence, many Southern European cities witness today net emigration and brain drain that might have long-term effects on their future development. As argued by Caruso, Cotella, & Pede (in this volume) all these recent trends add a further dimension to the increasing social and economic complexities of contemporary urban life in Southern European cities.
