Europe’s Summer of Recovery Is More Fragile Than It Looks
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ALBUFEIRA, Portugal — Until last week, Raissa Moura and her co-workers at the reception desk of the Pine Cliffs Resort were feeling optimistic that life was returning to normal along Portugal’s Mediterranean coast.
The previous year, as the pandemic halted travel, they had fretted over the desolation of the usually bustling, 1,300-bed hotel and villa complex. They had suffered layoffs and worked weeks on end inside an eerily quiet lobby processing cancellations. Outside, foxes brazenly wandered the abandoned grounds.
But this summer was already shaping up nicely in the Algarve, Portugal’s leading tourist destination. Cases of Covid-19 had dropped so dramatically that Britain had designated Portugal a so-called green country, permitting its citizens to visit without having to quarantine on return. The sun loungers arrayed beneath the pine trees were full of people hoisting cocktails. The resort’s eight swimming pools echoed with the sounds of splashing children.
“It feels hopeful,” Ms. Moura, 28, said on a recent afternoon. “The resort is alive again.”
But the next day, London jolted Portugal by revoking its green country status, citing a troubling rise in cases. Ms. Moura and her colleagues braced for another surge of cancellations. Along the coast — from seaside palapas to cliff-top restaurants to car rental lots — people whose livelihoods depend on tourists abruptly started to prepare for another lost summer.
“People were like, ‘Here we go again,’” Ms. Moura told me the day after the news broke.
I traveled here from London in early June to report what was supposed to be a story about a country reopening to the world, a heartening example of Europe finally recovering from the economic catastrophe that has accompanied the worst pandemic in a century. Portugal had absorbed the worst of Europe’s double-dip recession in the first months of this year after imposing strict curbs on economic life to choke off the virus. Now, it was poised to harvest the reward and recover faster.
But the story of Portugal’s unfolding summer turns out to be a tale of the pandemic’s stubborn endurance and the volatile nature of expectation as the virus undercuts plans to recommence ordinary life. Despite signs of progress, no one knows what will happen next — in Portugal, across Europe and throughout the global economy. The ambiguity is forcing businesses and families to tread carefully, putting off investments, delaying plans to travel and deferring decisions while waiting for elusive certainty — a state of mind that could itself perpetuate the downturn.
Ever since the pandemic emerged, policymakers in wealthy countries have depicted lockdowns as an effort to halt the spread of the coronavirus. Governments cushioned affected workers while waiting for the public health threat to recede. Eventually, the thinking went, they could safely turn the economy back on.
Portugal’s season of doubt underscores how economies do not come with built-in power buttons. Resorts are struggling to hire seasonal labor because workers are reluctant to risk traveling to the region so long as future closings remain possible. Local workers are cautious with their money. Resorts are putting off upgrades, depriving construction workers of jobs. Potential visitors must navigate the complexity of changing government policies on quarantine and testing requirements.
“It’s not a simple switch on and off,” said the general manager of the Pine Cliffs Resort, Thomas Schoen. “It’s been a stop and go all the way along the line.”
The big picture in Europe is increasingly positive. After fumbling the initial phase of the vaccination campaign, Europe has achieved momentum, allowing governments to ease restrictions. Shops have reopened in all 27 nations of the European Union, while cafes and restaurants are permitted to serve outdoors. Economic activity in the service sector has soared.
Economists expect that the 19 nations that share the euro currency will see robust economic expansion this year — a rate of 4.2 percent, according to a recent forecast from Oxford Economics.
Central to the optimism is the reality that Europeans are increasingly on the move, portending a potentially lucrative summer tourist season.
Within the eurozone, the use of public transportation increased in May, reaching 72 percent of its prepandemic level, according to tracking data compiled by Jefferies, a financial services company. Flight activity edged up to 28 percent of its level before Covid-19, and visits to accommodation booking websites leapt to 110 percent of its pre-Covid level, up from 40 percent in December.
Countries that are heavily reliant on tourism appeared likely to benefit, among them Greece, Italy and Spain. None was better placed than Portugal, where — before the pandemic — tourism made up nearly one-fifth of overall economic activity, according to government data.
During the first three months of the year, as the government imposed a lockdown, Portugal’s economy contracted by an alarming 3.3 percent compared with the last quarter of 2020 — far worse than the 0.6 percent slide experienced by the eurozone.
The pain appears to have yielded a substantial gain: From January to May, Portugal’s new Covid cases plunged to less than 200 a day from more than 15,000.
“We are already starting to see a better public health picture, and so things are also improving in the economic picture,” said Ricardo Amaro, a senior economist at Oxford Economics.
Britain’s decision to list Portugal as a green country was especially significant. The British traditionally flock to Portugal as a respite from their often-dreary weather, much as New Yorkers use Florida to escape winter.
Portugal received more than 2 million visitors from Britain in 2019, according to the national tourist board. Only neighboring Spain sent more.
In the Algarve — a seaside empire of villas, resorts and golf courses — the region’s unemployment rate sits stubbornly above 10 percent, compared with 7.1 percent for Portugal as a whole. The reawakening of tourism was supposed to fix that.
At a fish market in the town of Quarteira, the reopening of restaurants was generating fresh demand for the briny-scented harvest of sea bass, squid, octopus and prawns.
“This year is much better than last year,” said Assunção Gomes as she tended to the market stall she oversees with her mother.
But for most local merchants, the recovery was more aspirational than apparent.
Carlos Martins, a 41-year-old father of two, supports his family by working on a fishing boat, hauling in nets full of sardines. In summers past, the price of sardines has reached 7 euros a kilogram (about $8.50), as wholesalers arrived from Spain to snap up the catch. As foreign buyers stayed away last year, prices sunk by 85 percent, pulling his wages down by nearly as much.
“We’re all waiting for the prices to recover,” Mr. Martins said. “When the fish are nearly free, fishermen don’t get paid.”
Vera Galvão had worked as a waitress in her father’s seafood restaurant for more than two decades when the pandemic emerged, forcing the business to close.
Most workers continued to draw paychecks under furlough schemes in effect in much of Europe. But when Ms. Galvão went to file the paperwork to receive benefits, she was horrified to learn that she was not eligible: Her father had failed to pay the required taxes, she said.
Between May and July of last year, Ms. Galvão, 41, a single mother of two boys, relied on loans from friends to buy groceries. She now works for a nonprofit that collects food from area supermarkets and delivers it to households in need.
“Many, many people who have lost jobs still haven’t been able to find new ones,” she said.
Continued anxiety about job security limits sales for local businesses, discouraging them from hiring — a feedback loop of lean fortunes.
At a beachfront cafe in Quarteira, glass shelves display freshly baked pastries — regional delicacies like fig and almond cake, and national standbys like Portuguese egg tarts. But sales are weak, complained the proprietor, Manuel Picareto, 71. Most of his customers are locals who work in tourism.
“Instead of two pastries, people buy one,” Mr. Picareto said.
As villa owners canceled trips last year, they scrapped swimming pool maintenance and landscaping, ravaging the books of AlgarvePool.com, a company owned by a Ukrainian couple, Iryana and Sergii Liashenko.
“Our income is down 75 percent,” said Ms. Liashenko, 37.
The Liashenkos had been feeling hopeful as their phone rang in recent weeks. Villa owners were returning. Their pools and gardens were choked with weeds and algae. Irrigation systems needed repair.
“We think we’ll have more money coming in,” Ms. Liashenko said.
A few hours later, the British government pulled Portugal’s coveted green country designation. The news resonated like a thunderstorm on a wedding day.
“Everybody’s crying,” said Cláudio Lopes Meireles, a Brazilian who owns a gelateria in Albufeira, using an unprintable word to describe what Britain had just done to local fortunes. “We live by English tourists.”
In anticipation of fewer sales, he was limiting his purchases of imported supplies — pistachios from Sicily, cocoa from Belgium — exporting austerity to the rest of the continent.
At a nearby liquor distributor called Empro, managers pointed out a stack of 800 cases of hard cider piled nearly to the rafters inside a cavernous warehouse, and wondered if they would find takers before the contents expire.
Empro relies on British visitors for more than two-thirds of its sales. The cider was among several products it had stockpiled to cater to uniquely British tastes. Tourism stands to benefit from the European Union’s newly developed Covid certificates that permit travel for those who are fully vaccinated or have recently been tested. But Empro’s marketing manager, Susana Cavaco, waved away the suggestion that visitors from elsewhere might compensate for the loss of Britons, given their legendary proclivities to consume vast quantities of alcohol — beer on the beach, followed by cocktails and wine into the dinner hours.
“No one drinks like the British,” Ms. Cavaco said.
The government in London would not reassess its green country list for another three weeks.
At the Pine Cliffs Resort — a complex of white buildings topped by terra cotta tiles set on a commanding perch above the sea — management has struggled to recruit enough seasonal workers, leaving the property understaffed by about 25 percent, said Mr. Schoen, the general manager.
Given the need for social distancing, it cannot run a breakfast buffet, but it lacks enough staff for efficient sit-down service, leaving guests waiting at tables for orders.
Mr. Schoen has built up cash reserves against future troubles. He has put off an investment into a new children’s club and delayed the planned refurbishment of restaurants.
“I believe in the good things to come, but we also need to be realistic,” Mr. Schoen said. “I’m not convinced we have overcome every bump in our way. We will keep holding back until there is a good level of certainty.”
The next day, Britain downgraded Portugal from an approved holiday destination to a potentially dangerous breeding ground for coronavirus variants.