Oh, Europe. The buildings, the traditions … and the protests. It seems every few days there is another announcement of another round of protests hitting the streets, and the financial crisis seems to grow ever worse. But what is actually going on?
The financial drama is currently revolving around two separate figures, with a plethora of smaller players in the mix. Greece and Spain combined make up 10.6% of the EU’s GDP, a significant amount by any estimation. Both of these countries are in considerable distress on a variety of levels, with unemployment levels of 25% and 21%, respectively.
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| Protesters in Athens decry austerity measures |
The simplest explanation for the situation in Greece may be found in the credit and property busts of 2009, along with an economic plan often referred to as “austerity”, meaning cutting as many government programs and benefits as quickly as possible in order to reduce debt. While this may seem like a good idea in principle, the speed at which the programs were reduced seems to have crippled the economy.
Spain’s problems are similar, though beginning later were somewhat caused by other countries’ crises. It begins, however, with an enormous national debt and a steadily increasing deficit. At the advent of the Euro zone crisis, Spain anticipated difficulty due to a drop in its credit rating. However, the sudden drop in Greece and Portugal’s economy brought the crisis to a sudden head, aggravating an already difficult situation.
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| In Barcelona, citizens call for change |
With the size of the Spanish economy what it is (around $1494 Bil) a bailout the likes of the Greek bailout would simply not be possible, with an EU rescue fund of 1.3 Tril to be used by the entire EU. So far, both the Greek and Spanish response have been severe cuts in government programs and services.
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