Poverty drives central Europe's great exodus

Posted at 03/30/2012 6:59 AM | Updated as of 03/30/2012 6:59 AM

LUPSANU, Romania - Maria Ene's traditional white house on a muddy, unnamed Romanian street doesn't have running water, but it does have two satellite dishes sprouting from its fence.

Three of Ene's five children have moved to Spain. It's not that far, but with everyone feeling the pinch of Europe's economic downturn, she sees them once a year at most, and needs to feel connected.

"I saw them on the Internet," said Ene, 69, who lives in the small village of Lupsanu, 75 km east of Bucharest.

"A grandson of mine showed them to me as I felt at one point I could not go on," she said, with tears in her eyes.

"It's hard there for them, but what would they do here? There at least they have a job."

More than 20 years after the fall of communism, the wealth gap between the east and west of Europe persists, and countries from the Black Sea to the Baltic are shedding people at an alarming rate.

While membership in the European Union has brought prosperity to many, it has also made it easier to emigrate, drawing young people out of the east, especially rural areas, and leaving behind an ever older and poorer population.

Romania, the EU's second-poorest member with an average monthly wage of $450, is one of the worst affected, with a 12 percent population drop in a decade, according to census data.

At the other end of the continent, the census in Latvia - a Baltic state which was seen as a great success story until the current financial crisis sent its economy into freefall - showed it lost 13 percent of its people, mostly to emigration.

Both countries have had to impose harsh austerity programmes under the terms of International Monetary Fund-led bailouts.

The population in comparatively richer countries like the Czech Republic and Poland has remained steady thanks to returning emigrants and others arriving from less well-off states in the region.

But to the south, in the Balkans, and in the northern Baltic states, the picture is grim. Censuses conducted across the continent in 2011 showed Lithuania has lost 12 percent of its population in a decade, Bulgaria 7 percent and Serbia, still outside the EU, 5 percent. Hungary had 10.4 million people just after the 1989 fall of communism, but statistics office data show that slipped below 10 million last year.

Wealthy Germany's population, by contrast, rose last year for the first time since 2002 thanks to immigration from the EU's new members, despite the fact deaths were projected to exceed births, according to its statistics office.

People who opt to leave the poorer parts of Europe do not sense there will be an improvement in living standards any time soon.

"Ninety percent of Romanians do not believe there is going to be a better future in Romania," said Victor Ponta, who leads Romania's leftist opposition and is favourite to be the next prime minister after a November election.

Age-old challenge

By 2060, Romania, Latvia, Poland and Bulgaria will have the highest share of elderly people compared with working population in the EU, Eurostat data shows. That means the number of taxed workers will decline just as government expenditure rises to help ever more pensioners in need of support.

Of Romania's 19 million population, less than 5 million are workers paying taxes, with most of the rest pensioners, children, subsistence farmers or people working illegally. Costs for the more than 5 million pensioners amounted to 9 percent of GDP in 2010.

Romania has raised the retirement age to 65 for men and 63 for women, but it will not be enough to keep the budget on track, and Latvia is considering a similar step.

"Under this worst case scenario, social security costs will mount to very high levels," said Mihai Patrulescu, an economist at B a ncpost, part of Greece's EFG Eurobank.

"To address this problem, governments would have three options: raise the retirement age, increase taxes or run permanently higher deficits."

The EU has declared 2012 the "European Year for Active Ageing" to encourage both companies and workers to support the idea of employment at older ages and to help older people to continue living independently.

Newly appointed Labour Minister Claudia Boghicevici said Romania plans new legislation to give tax breaks to companies hiring older people and better support for those in need of special care. But those kind of measures will do little to improve the lot of people in villages like Lupsanu right now.

Abandoned villages

In February, temperatures in Romania plunged below minus 20 degrees Celsius and snow storms blocked roads, railways and ports and even buried many houses in the south.

Elderly villagers without young family members or neighbours struggled to dig their homes out from under some three meters of snow and had to be rescued by the army.

Abandoned homes and villages dot the Latvian region of Latgale, near the border with Russia. In the town of Merdzene, a new school stands by an abandoned Soviet-era apartment block covered with shattered and taped windows.

Inta Nogda, a 45-year-old elementary school teacher, said her son left for England with his girlfriend and her brother. Now, all of his friends have followed.

"He told me 'You know, Mum, if I had anything to do here, I would never have left,'" Nogda said. "There are six families that live in our building. Out of 21 people, eight are abroad."

Rebeca Pop left Romania in 2010 to study in the United States and does not expect to return any time soon.

Pop, 24, is the kind of young person Romania, which is rich in resources like farmland, gas, precious metals and a skilled but still relatively cheap workforce, needs to keep to tap its full potential.

"I had multiple reasons to leave Romania: quality of education, work environment, opportunity, money and social issues," Pop told Reuters by telephone from Oklahoma, where she has nearly completed a Master's degree in communications.

Pop already has a research job in Michigan. After that, she may move to another country.

"I was tired of seeing people who do not respect each other on the streets, people who always look stressed and unhappy and who cannot enjoy small things in life," she said.

Benefits

There are benefits to having big populations working abroad.

Romania's huge diaspora sent roughly 2.6 billion euros ($3.4 billion) home to their families in 2011, some 2 percent of GDP - well below the remittances in the boom years before the economic crisis but still a lifeline for poor communities.

Working abroad also helps people acquire skills and many eventually return with those skills because of family links, said Roderick Parkes, of the foreign policy thinktank German Institute for International and Security Affairs.

And while an ageing population means older workers, they also have more experience, Parkes said.

"I think the panic is overdone and the reality is more nuanced," he said. "It could eventually be good for Romania."

Gabriela Gryger returned to Poland after working for Morgan Stanley, Soros Real Estate Partners and Goldman Sachs in London, New York and Frankfurt. Now in her mid-30s, she owns and runs a real estate investment agency in Warsaw.

"Poland has changed a lot," Gryger said. "The real estate industry that I deal with has opened widely to foreign investors and developers, which also made Poland an attractive place for me to work."

Headhunters in western Europe increasingly value professional experience in the emerging EU and are looking for candidates for posts in Poland, she said.

But in Romania, it's the downside that is far more obvious.

Lupsanu has lost nearly a tenth of its population since 2002 and more than 3 percent of those registered in the area work abroad, said mayor Victor Manea.

"Around 60 percent of the population in the commune is above 50, so I expect the population to continue dropping. Marriages are fewer and fewer, and the number of deaths is double the number of births in the last years," Manea said.

Pensioner Ene is struggling to make ends meet.

"I have a 300 lei ($90) pension and my husband has 600 lei," Ene said. "We live from one day to the next."