The financial troubles in Europe are worsening by the day. Greece's looming insolvency could be shored up by a €120 billion bailout from the European Union, but Germany's insistence that the debt-laden country introduce stricter economic reforms is holding up the process, and has sent the value of the euro tumbling. Meanwhile, other EU countries have had their debt levels downgraded, and some analysts fear a continent-wide economic crisis. (Watch a Bloomberg discussion about the widespread impact of the euro's decline.) A nation-by-nation guide to the key players:
The beleaguered country had its credit rating downgraded to "junk" status earlier this week, a move that threw international markets into disarray. Greece's budget deficit is 13.6 percent higher than its GDP; to stave off bankruptcy, it needs a bailout of between €100 and 120 billion from the EU and the IMF. But first, the country must agree to stringent financial conditions — including raising sales taxes to as much as 25 percent, and imposing a three-year pay freeze for public employees. Greek trades unions have promised "civil war" if this happens. Some observers speculate that Greece might abandon the euro altogether — though this would make it far harder to repay its debts and could spark "an awesome banking crisis."
Some economists say the Mediterranean country could be the next to require a large bailouts. With spiralling public debt and a 9 percent budget deficit, Portugal had its credit rating downgraded this week, just as Greece did months before its true financial woes became apparent. The country's parliament is set to approve an "austerity plan" to hike taxes and cut spending.
With an economy five times larger than Greece's, Spain is also running a large budget deficit (around 11 percent) and had its credit rating downgraded this week. The latter development was an "ominous new blow," according to the Boston Herald. To quote one analyst, "If Spain were to fail, it would turn into a major macro-economic event that would threaten all indebted economies, including the UK and the US."
With the largest economy in the eurozone — and one of the healthiest — Germany is being called upon to contribute around €25 billion toward the bailout of Greece, a sacrifice that has angered many Germans. Greece is a "bottomless pit," fumed tabloid newspaper Bild in an editorial. Around 86 percent of the population opposes bailing out Greece, and with local elections scheduled for May 9, Chancellor Angela Merkel is pushing for even harsher terms in exchange for a bailout.
Like Germany, France's economy is on the upswing, and it's planning to put €3.9 billion towards the Greek bailout this year, with more expected in 2011 and 2012. President Sarkozy maintains that unity is important in dealing with the crisis. "France is convinced that it is completely unproductive to accuse one another, and it is a much more intelligent approach to prepare necessary changes to the international monetary order," he said.
The UK's decision not to adopt the euro in 2001 means it is shielded from the currency fluctuations damaging the eurozone. But its economy is far less stable than that of Germany or France. Its deficit of 12.6 percent is "one of the biggest ... in the world," though its debt level remains manageable. If next month's general election produces a hung parliament, however, some are predicting market instability or even a downgrading of the UK's credit rating.
THE WEEK'S AUDIOPHILE PODCASTS: LISTEN SMARTER
- 13 Urban Outfitters controversies
- 6 things the happiest families all have in common
- 43 TV shows to watch in 2014
- This is how the U.S. thinks China could invade Taiwan
- The science of sex: 4 harsh truths about dating and mating
- Why you should stop believing in evolution
- Can we lead spiritually fulfilling lives without religion?
- Surviving a plane crash
- Obama knows he can't really 'defeat' ISIS. Americans need to wake up to that reality, too.
- Stop freaking out over the West's jihadi tourists
Subscribe to the Week