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Free-spending visitors are fueling a powerful boom in southern Europe, flipping economic power in the EU. Some economists think it could end badly.

LISBON—The Americans are here, and this sun-bleached coastal city is booming.

At bars, hotels and restaurants that line winding cobblestone streets, business is so good that Mayor Carlos Moedas recently slashed local income tax for residents. With economic growth of 8.2% last year and a 20% rise in tax revenue from prepandemic times, he’s also made public transportation free for young people and the elderly.

Centuries-old facades are being polished up after years of neglect. Planning is under way for a new airport, twice the size of the existing one, and for a three-hour high-speed rail link to Madrid in neighboring Spain. The Tribeca Film Festival will come to town this fall.

Room rates in the city are rising, and tourism investment is flooding in. Gonçalo Dias, director and co-owner of the Ivens, a $1,000-a-night hotel in downtown Lisbon, said he plans to add a jazz club in the basement. More than half of his room reservations come from Americans.

“Great times. The best times for the last 45 years,” he said. “It’s crazy.”

A Mediterranean rush

Across southern Europe, an unprecedented tourism boom driven largely by American tourists is turbocharging growth in places that had become bywords for economic stagnation, creating hundreds of thousands of jobs and filling the coffers of governments recently shaken by sovereign debt fears.

Even as some worry the boom may be creating other problems, the Mediterranean rush is turning Europe’s recent economic history on its head. In the 2010s, Germany and other manufacturing-heavy economies helped drag the continent out of its debt crisis thanks to strong exports of cars and capital goods, especially to China.

Today, Italy, Spain, Greece and Portugal contribute between a quarter and half of the bloc’s annual growth.

While Germany’s economy is flatlining, Spain is Europe’s fastest-growing big economy. Nearly three-quarters of the country’s recent growth and one in four new jobs are linked to tourism. In Greece, an unlikely economic star since the pandemic, as many as 44% of all jobs are connected to tourism.

The short term is bright, and governments are pushing to build on that momentum. But some economists, residents and politicians are concerned about the boom’s long-term implications.

Rent and other living expenses are rising in hot spots, making it harder for many locals to make ends meet. A heightened focus on tourism, which turns a quick profit but remains a low-productivity activity, tethers these economies to a highly cyclical industry. It also risks keeping workers and capital from more profitable areas, like tech and high-end manufacturing.

Can Europe’s emerging “museum economy” support sustained wealth creation and the expansive welfare systems Europeans have become accustomed to since the end of World War II? And what happens if the dollar falls and the tourists leave?

The new economic engine

In Portugal, a country of 10 million that juts out into the North Atlantic from Spain, Americans recently surpassed Spaniards as the biggest group of foreign tourists.

“It is literally, for Americans right now, the place to go,” said Ameshia Cross, a political strategist from Washington, D.C., visiting Portugal for the first time.

The strong dollar—and a powerful post-Covid recovery—has empowered millions of Americans who would have vacationed in the U.S. before the pandemic. They are now finding they can afford a lavish European holiday.

“Your dollar goes a lot further,” Cross said over coffee in the lobby of her five-star hotel. “You don’t feel you’re scrounging as much.”

On her six-day trip, Cross picked up cheap tickets to see Taylor Swift in concert—also the singer’s first visit to Portugal—and shopped for clothes on the tony Avenida da Liberdade. One of her friends happened to be in Lisbon at the same time, she said. More friends were coming in two weeks, and another group in September.

Tourism now generates one-fifth of economic output in Lisbon and supports one in four jobs. That boom has reverberated far beyond the capital.

Portugal’s gross domestic product grew nearly 8% between 2019 and 2024, compared with less than 1% for Germany, according to International Monetary Fund estimates. The government recorded a rare 1.2% of GDP budget surplus last year, and its debt-to-GDP ratio is expected to fall to 95% this year, the lowest since 2009. Portugal’s population is growing again after years of decline, thanks in part to an influx of migrant workers and to various tax incentives and investor visas that have attracted high-income workers.

Moedas, Lisbon’s mayor, says there’s room for further growth. For a city that doubles in size to around one million every day, including commuters, only around 35,000 are tourists, he said. “We are very far from a situation of so-called overtourism.”

How an economic crisis paved the way

The trend is part of a global readjustment following the Covid-19 lockdowns. Spending on travel and hospitality worldwide grew roughly seven times faster than the global economy over the past two years, according to Oxford Economics. That pattern is expected to continue for the next decade, though to a lesser degree.

Europe, especially southern Europe, has benefited more than many other regions. Though it is home to just 5% of the world’s population, the European Union received around one-third of all international tourist dollars—more than half a trillion dollars—last year. This is up roughly threefold over two decades, and compares with about $150 billion for the U.S., where tourism has been slower to rebound.

One reason is the brutal sovereign debt crisis that hit the continent’s south especially hard just over a decade ago. Unable to stimulate demand with public spending or to energize exports by devaluing their currency—the euro, which is shared by 20 states—those countries could only boost their competitiveness by lowering wages. This and a real estate collapse that left hundreds of thousands of workers suddenly available made the region’s tourist industry ultracompetitive, much cheaper than Caribbean beach destinations and on a par with Latin American destinations like Mexico.

For Portugal, there was another, little-known reason the eurozone debt crisis turned out to be an unexpected boon.

When the country was rescued with a €78 billion bailout in 2011, around $115.5 billion at the time—the final indignity at the end of a decadelong economic downturn—one way the government agreed to raise money in return was by privatizing TAP Air Portugal, the struggling national airline. It sold a controlling stake to a consortium formed by JetBlue founder David Neeleman.

“I was born in Brazil, speak Portuguese, but had never been to Portugal myself,” Neeleman said. “I didn’t know anyone who had been to Portugal…. It was so inconvenient that people didn’t do it.”

Once an owner of TAP, Neeleman increased the number of direct flights to the U.S. eightfold between 2015 and 2020, adding major hubs such as JFK and Boston Logan, betting that would open up an untapped market. As bookings soared, other U.S. airlines followed.

“It was actually comical, because I went from knowing no one who had been to Portugal to everyone telling me they were going to Portugal,” said Neeleman.

Moedas, the mayor, said: “I don’t think people at the time realized how important it was.”

Signs of discontent

For Gonçalo Hall, a 36-year-old tech worker, the influx of foreign cash that has transformed Lisbon has been overwhelmingly beneficial for the city. When he lived in the capital 15 years ago, he wouldn’t walk in the historic downtown after 8 p.m. It was “full of homeless people, not safe. Lots of empty and abandoned buildings,” he said.

Even so, the boom has had downsides for him and other locals—the most immediate of which is the rise in living costs.

“The quality of life in Lisbon doesn’t match the prices. Even expats are leaving,” said Hall, who moved to the Atlantic island of Madeira during the pandemic and continues to work remotely.

The average Portuguese employee earns around €1,000 a month after tax, or around $1,100 a month, and only 2% earn more than €2,000. A one-bedroom apartment in Lisbon can easily cost more than €500,000 to buy, or over €1,200 a month to rent. Rents in nearby cities are also climbing as people leave the capital, squeezed out as lucrative short-term rentals transform the housing market.

Jessica Ribeiro, a 35-year-old sociologist, pays around €490 a month for an apartment that she shares with her ex-husband in a town close to Lisbon. Neither can afford to leave. Both make a little more than the minimum wage of €820 a month, and soaring rents mean it is impossible to find an apartment in the neighborhood for less than €700, Ribeiro said.

“The harm that tourism has brought is infinitely bigger than the benefits,” Ribeiro said. “It sends people away from their place of work, making their lives much harder.”

A frequent complaint from residents and housing advocates is that some of the boom’s biggest winners are American companies, from Airbnb to Uber, which often pay little tax in the places where they do most of their business.

Lisbon is cracking down on Airbnbs and increasing taxes on tourists, doubling the nightly city tax from €2 to €4, which should raise €80 million a year. Airbnb has paid Lisbon and Porto, Portugal’s two biggest cities, more than €63 million after entering into voluntary tax collection agreements with local officials. Moedas said he is considering “a bit more regulation” of the city’s many Ubers, whose drivers he said don’t always respect traffic rules.

An Uber spokesperson said most of the revenue generated by the platform stays in the local economy, and the company last year helped drivers, couriers and restaurants in Portugal earn more than €500 million. All Uber drivers in the country are required to be licensed by a state agency, the spokesperson said.

Around nine in 10 Airbnb hosts in Portugal rent their family home and almost half say the extra income helps them afford to stay in their homes, according to a spokesperson for the company. “Guests using our platform account for just 10% of total nights booked in Portugal, and we follow the rules and only allow listings that are registered with local authorities,” the spokesperson said.

For many residents, the government’s remedies don’t go far enough. “All the city is subordinated to tourism,” said Rita Silva, a housing campaigner and researcher.

Higher rents are forcing many businesses and cultural and social spaces catering to locals to close, according to Silva. “This is not an economy that is serving the needs of the majority of people,” she said.

Signs of discontent are bubbling up across the region. Tens of thousands of local residents marched in Spain’s Balearic and Canary islands in recent months to protest mass tourism and overcrowding. On Mallorca, activists have put up fake signs at some popular beaches warning in English of the risk of falling rocks or dangerous jellyfish to deter tourists, according to social-media posts.

‘Beach disease’

Some economists and others worry swelling tourism might be aggravating Europe’s existing economic challenges.

Serving foreigners is difficult to scale up and is more exposed to economic headwinds. Like the discovery of oil, southern Europe’s new focus on tourism can crowd out higher-value activities by hogging capital and workers, a phenomenon some economists have dubbed the “beach disease.”

“Portugal isn’t an industrialized country. It’s just the playground of the EU,” said Priscila Valadão, a 43-year-old administrative assistant in Lisbon. She makes €905 a month and rents a room from a friend for €250 a month. “The type of jobs being offered…are restricted to a type of activity that really doesn’t enrich the country,” Valadão said.

For Europe’s policymakers, having people open hotels or restaurants is easier than incentivizing them to build up advanced manufacturing, which is capital intensive and takes a long time to pay off, said Marcos Carias, an economist with French insurer Coface.

“Tourism is the easy way out,” Carias said. “What is the incentive to look for ingenuity and go through the pain of creating new economic value if tourism works as a short-term solution?”

Proponents say tourism attracts capital to poor regions, and can serve as a base to build a more diversified economy. Lisbon’s Moedas said he is trying to leverage the influx of foreign visitors to build up sectors such as culture and technology, including by developing conferences and cultural events.

“Some extreme left parties basically say we need to reduce tourism,” Moedas said, but that is the wrong approach. “What we have to do is to increase other sectors like innovation, technology…. We should still invest in tourism, but we should go up the ladder.”

In Athens, Mayor Haris Doukas says he is working on extending the tourist season, increasing the average length of stay and promoting specific types of tourism, such as organizing conferences and business meetings, to attract visitors with higher purchasing power. He’s also called for new taxes to help the city accommodate the millions of additional tourists thronging to the ancient capital.

Workforce woes and booming business

One symptom of “beach disease”: Higher living costs and a lack of high-wage jobs are encouraging more Portuguese students to leave the country, said Arlindo Ferreira, a school principal in northern Portugal.

Schools are also struggling to recruit teachers, “not only because of the living costs but also [they] can get better salaries in other areas,” Ferreira said.

More than one-third of highly qualified Portuguese students leave the country after graduating, according to Raquel Varela, a labor historian and professor at New University of Lisbon. Even higher-paid technology workers have started decamping to cheaper places.

Tiago Araújo, chief executive of tourism tech startup HiJiffy, has held on to his employees but says many of them have been moving out of Lisbon. The trend, which started during Covid, is now being primarily driven by the housing crisis.

Still, the tourism boom has helped Araújo’s company. Hotels now have extra resources to invest in HiJiffy products, including a Facebook messenger chatbot that allows guests to book rooms directly rather than through big online platforms that charge hefty commissions.

For many beneficiaries of the boom, the lure of free-spending Americans who have helped bring about this transformation is just too attractive.

While Dias, the hotel owner, is diversifying into nightlife, he refuses to envisage a future where the sector would have to rely heavily on visitors from elsewhere.

If Americans stop coming to Lisbon, he said, “I don’t think we can charge this kind of [price] because we will have to go to Europeans, and the Europeans, they don’t have money.”

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Elliott and Carlyle square off in $4bn debt dispute over software company

Clash over tech group Veritas portends future stand-offs between private equity and distressed debt investors

Elliott Management, the hedge fund founded by billionaire Paul Singer, has upended a $4bn debt restructuring at a business owned by Carlyle Group, in a stand-off illustrating the tensions high borrowing rates are unleashing at private equity portfolio companies.

Veritas Holdings, a software business Carlyle bought in 2016, revealed in a securities filing this week that negotiations with an Elliott-led group of creditors over a 2025 debt maturity date had reached an impasse.

Elliott’s push to use its position as a large debtholder to extract a bounty threatens a last-ditch effort by one of the world’s largest private equity groups to salvage a multibillion-dollar investment.

The clash stems from Carlyle’s decision in February to spin off a division of Veritas and merge it with Cohesity, a private artificial intelligence software company whose backers include SoftBank, Sequoia Capital, and the billionaire technology investor Brian Sheth.

Carlyle designed the merger to refinance Veritas’s debt without having to draw more money from its decade-old fund that made the investment but now carries little cash. It is a challenge faced by a growing number of ageing private equity deals that typically would have been harvested years ago. Instead, many such portfolio companies are facing imminent debt maturities against a much harsher interest rate backdrop.

Private equity firms are sitting on a record $3.2tn in unsold assets, according to consultancy Bain & Co. Deals with about $500bn in debt mature by the end of 2028, according to PitchBook data. Without easy dry powder to draw, more groups will be forced to engineer solutions such as the Cohesity tie-up that requires no new money to be found.

But these efforts will face a stiff test from current creditors including loan funds and opportunists such as Elliott, which can buy debts trading at distressed discounts and then seek to reap a large windfall. These duelling forces then turn into contests to see which side blinks first.

Veritas has been negotiating a multi-step debt repayment and exchange offer with creditors holding $2.5bn of loans and $1.8bn in bonds which it says will enable the debt to be paid off at about 100 cents on the dollar.

Elliott and allies which hold more than half of Veritas’ debt have countered that the terms of the proposed restructuring would still leave them short-changed.

Elliott has disputed the value of the package that Veritas offered, which includes less than 60 cents on the dollar in cash repayment. The remaining 35 cents to 40 cents will come from assets with fuzzier worth, according to securities filings and people familiar with the hedge fund’s thinking. Elliott is pushing Carlyle for additional upfront cash as well as a greater stockpile of the remaining assets.

Elliott, which famously prevailed in a decades-long debt fight with Argentina, is considered one of finance’s most formidable scavengers. Carlyle is a pioneer of the leveraged buyout industry, co-founded by David Rubenstein, and has counted ex-heads of state and captains of industry among its leaders.

In its securities filing on Monday, made public after the latest round of negotiations, Veritas wrote its offer was “highly constructive”, and it remained “ready and willing to work constructively towards a fair par exchange”.

A person close to the Veritas camp described Elliott’s brinkmanship as “terrorism 101”. Another person aligned with Veritas maintained the Cohesity merger was a “huge net positive for everybody involved” allowing Veritas creditors to avoid haircuts to their debt that once seemed inevitable.

Veritas has struggled since Carlyle bought it from Symantec for $7bn. Its debt has traded below 80 cents on the dollar, a level generally viewed as a sign of financial distress that Elliott viewed as an opportunity.

The crown jewel of Veritas, however, is its “data protection” segment that complements the Cohesity business. The companies have valued the combined businesses at $7bn.

After the planned merger, Cohesity is set to raise $3.2bn in new debt and send $2.5bn back to Veritas. Creditors of Veritas would then receive 56 cents on the dollar in cash. The rest of the payment to creditors is to come in the form of fresh debt issued by Veritas, secured in part by its equity stake in Cohesity.

The person close to Elliott, however, expressed concern about the value of the remainder of Veritas after it spins off its best business, and the terms of the Cohesity collateral, describing it as a “roll of the dice”.

Other Veritas creditors include BlackRock, Pimco, Canyon Partners and Silver Rock Financial, an investment firm funded by Michael Milken. Carlyle has expressed optimism that some of these parties can help bridge the chasm between Elliott and Veritas.

Elliott and several allies, however, have formed a so-called “co-operation agreement” that binds them to collectively adopt a unified posture against Veritas and Carlyle.

“Someone involved is frankly overplaying their hand,” said one adviser in the middle of the stand-off.

US car sales tycoon and AS Roma proprietor owns Hollywood production studios and flew a Spitfire in film ‘Dunkirk’

Romelu Lukaku received a rapturous welcome in Italy last summer after signing for AS Roma. But the football fans thronging Ciampino airport were seeking a glimpse not only of their new Belgian striker but also his pilot — Dan Friedkin, the club’s buccaneering owner.

Now the Hollywood producer, stunt pilot and scion of a car-sales empire is in exclusive talks to buy Everton FC, the Liverpool club where Lukaku hit the big time, according to three people with knowledge of the matter, in a deal that would be the latest to propel a US billionaire into the English Premier League.

As private equity firms, sovereign wealth funds and the super-rich have poured capital into football, the buying and selling of clubs has become a spectacle to rival that of player transfers. Everton is newly available after troubled Miami investment firm 777 Partners failed to complete a takeover from British-Iranian owner Farhad Moshiri.

Friedkin’s wealth — Forbes puts his fortune at $6.1bn — stems from Gulf States Toyota, founded in 1969 by his late father Tom, which has grown to become one of the world’s biggest distributors of the Japanese carmaker’s vehicles and parts.

Its parent company, The Friedkin Group, whose revenues totalled $13.3bn in 2023, according to a person close to the business, also spans golf courses, luxury resorts and a safari company in Tanzania, although automotive still provides the bulk of the conglomerate’s revenues.

Born in 1965, Friedkin comes from a long line of aviator-businessmen. His father was also a stunt pilot, while his grandfather Kenneth founded Pacific Southwest Airlines, a pioneer in low-cost flight.

After a bachelors degree from Georgetown University and a masters in finance from Rice University, Friedkin took the reins of the family empire in 1995, succeeding his father, who became chair until his death in 2017.

Alongside the car business, he has made a splash in Hollywood. A co-producer of Killers of the Flower Moon, the epic 2023 western directed by Martin Scorsese and starring Leonardo DiCaprio, Friedkin is also behind film studios Imperative Entertainment and Neon, producer of 2019’s South Korean Oscar-winning Parasite.

And his flying expertise and plane collection won him a role in Dunkirk, the 2017 portrayal of the second world war rescue of more than 338,000 Allied soldiers, in which he landed a Spitfire on the beach.

“We got in touch with a chap called Dan Friedkin who owns six Spitfires and is a fantastic flyer,” director Sir Christopher Nolan wrote at the time. “We got him to talk about the characteristics of the planes, how they flew, what g-forces the pilot can really sustain.”

But the €591mn acquisition of Roma in 2020 brought a new level of international recognition to Friedkin, who despite his glamorous credentials is described by people who have worked with him as a “private person”. One said he is “very poised, not the first guy to speak but when he does he’s always adding value”.

Friedkin brings a similar passion to football as he does to aviation, according to one senior figure in the sport who knows him. 

“He’s not doing it for fun and games. He feels every ball that’s kicked. When you’re with him and there’s a Roma match on, he’s got it on his phone,” the person said. “He’s a master of many trades [but] he knows what he doesn’t know. His instincts as to who the right people are in football are improving over time.”

In his short time as Roma’s owner, Friedkin has hired and fired Portuguese manager José Mourinho, reinforced the squad, decreased external debt and outlined plans to build a new stadium. Lina Souloukou, the Greek chief executive of Roma, previously told the Financial Times that the Friedkins “see themselves as custodians of an institution loved by the fans”. 

Despite winning the Europa Conference League and finishing runner-up in the Europa League, Roma has failed to appear in Europe’s top competition, the Uefa Champions League, since 2019.

The club reported net losses of more than €200mn in the financial year to the end of June 2020. Almost four years since the takeover, it is still battling to be financially sustainable — although it more than halved its full-year net loss to just over €100mn in 2022-23, as revenues jumped by more than a third to €277mn, including net gains from selling players of €47mn.

Football Benchmark, the consultancy, values Roma at €574mn-€633mn including debt, and Everton at €519mn-€574mn. But Everton is constructing a new home ground, an asset that is a “huge attraction” to Friedkin, according to two people with knowledge of the matter.

Everton’s finances have been precarious in recent years. The riverside Bramley-Moore Dock stadium strained the club’s finances at a time when revenues were plunging during pandemic lockdowns. The club, nicknamed the Toffees, took another hit when Moshiri was forced to cut sponsorship deals with companies linked to his former business partner, Uzbek-Russian billionaire Alisher Usmanov, following the full-blown invasion of Ukraine. And like Roma, it has been disciplined over its failure to comply with financial regulations that cap a club’s losses.

Friedkin is conducting due diligence. “It’s absolutely not a done deal,” one person warned.

Friedkin has also taken an interest in the sport beyond the confines of Rome, sitting on the board of the influential European Club Association, rubbing shoulders with some of the most senior executives in the sport. And representing the ECA in its joint venture with Uefa gives him a key role in the company that manages and exploits the commercial rights of the governing body’s club competitions.

But his potential acquisition of Everton threatens to reignite debate about so-called multi-club ownership.

Fans fear owners will prioritise one club over another, while football authorities worry about the integrity of European competition, particularly when it comes to the possibility of teams within the same ownership group playing against each other.

Friedkin is aware of the concerns, according to the football executive who knows him. But while Roma has performed well in European competitions in recent seasons, Everton has not come close, making a collision an unlikely prospect in the near term.

“If Everton get back into Europe, it’s a nice problem to have. He’ll have created value,” the football executive said. “He might not get it right the first time but he will get there.”