The Week: Most Recent World Economy

Europe's choice: Break up or become a super state?

The Week — Fri, 25 May 2012 11:55:00 -0500

Over the past two tumultuous years, Europe has lurched from one emergency rescue plan to the next in its attempts to resolve its debt crisis. Despite the creation of a massive bailout fund, the extension of billions of euros in loans to Greece and others, and the intervention in bond markets by the European Central Bank, the crisis threatens to boil over once again, putting the world at risk of a global economic slowdown. As the possibility of Greece's exit from the euro looms, these extraordinary policies seem little more than half-measures, and many are arguing that the eurozone's only hope for...

Would Greece's exit strengthen the euro?

The Week — Thu, 24 May 2012 12:05:00 -0500

The European debt crisis is reaching a boiling point. Greece is flirting with an exit from the euro currency, and European leaders are at an impasse over how to resolve the continent's economic woes. Many analysts say debt-plagued Greece's potential exit from the eurozone — an unprecedented scenario full of unknowns — could wreak havoc on the global economy by sparking a financial panic that spreads to other debt-saddled countries like Spain and Italy, effectively disintegrating the euro currency. But could a Greek exit actually benefit the euro?

Yes. A Greek exit could make the euro...

Will Europe pool its debt to save Greece?

The Week — Wed, 23 May 2012 13:05:00 -0500

European leaders are meeting in Belgium Wednesday to address the continent's worsening debt crisis, and to weigh a radical proposal to overhaul Europe's financial makeup. At the insistence of newly elected French President Francois Hollande, policymakers will discuss whether to create a "eurobond," a jointly-issued borrowing instrument that would essentially transform the euro currency bloc into a common debt pool, grouping the countries' existing IOUs. Creditworthy nations like Germany would offset debt-beleaguered countries like Greece, which would lower the latter's borrowing costs and...

The G8 consensus on Europe's debt crisis: Turning point or empty rhetoric?

The Week — Mon, 21 May 2012 12:05:00 -0500

This weekend, President Obama concluded a Group of Eight summit at Camp David by hailing an "emerging consensus" on the best approach to resolving Europe's debt crisis. In a collective statement, the G8 said budget cutbacks should be accompanied by pro-growth policies, which represented a subtle shift for German Chancellor Angela Merkel, the lead proponent of aggressive budget-cutting across Europe. The summit came amid political chaos in Greece, which is creeping toward an exit from the euro currency over popular objections to German-backed austerity programs. Will the G8's new push for growth...

The European debt crisis: Can Obama do anything to stop it?

The Week — Fri, 18 May 2012 11:13:00 -0500

President Obama is hosting leaders of the Group of Eight economies at Camp David in Maryland, where Europe's spiraling debt crisis is expected to be the top topic of conversation. European officials are working on emergency plans for Greece's possible exit from the euro currency, a development that could unleash chaos in global markets and stall America's fragile economic recovery. The White House views the crisis, and its potential impact on the U.S., as one of the biggest challenges facing Obama's re-election bid. The president is expected to wield as much influence as he can in encouraging...

Bank panic in Greece: What happens if Greeks quit the euro?

The Week — Thu, 17 May 2012 12:04:00 -0500

Greece's inconclusive elections in early May, which produced a splintered field that could not cobble together a government, have thrust the debt-ravaged country into deeper chaos. New elections are expected on June 17, but few predict they'll yield a stable coalition willing to carry out the EU-demanded austerity measures needed to keep Greece in the euro currency bloc. Since the election, panicked depositors have withdrawn 3 billion euros ($3.8 billion) from their checking accounts, and as much as 800 million euros on a single day earlier this week. Meanwhile, the European Central Bank ...

Can a new election save Greece?

The Week — Mon, 14 May 2012 09:55:00 -0500

Greece's anti-austerity Syriza party refused to participate in last-ditch efforts to form a unity government Monday, making it increasingly likely that the debt-burdened country will have to hold new parliamentary elections in June to break the impasse. European finance leaders, who are meeting in Brussels Monday, insist that Greece must stick to the harsh spending cuts that the last government agreed to in return for a massive bailout. But Syriza, which placed second in voting a week ago and could be the top vote-getter in fresh balloting, insists that the austerity measures are "catastrophic...

Will Germany cave in to the demands of Greece's anti-austerity parties?

The Week — Fri, 11 May 2012 07:35:00 -0500

In the aftermath of watershed elections this month, Greece's splintered political system is struggling to form a ruling coalition. The main obstacle is Syriza, a fringe party that rode to an unprecedented, second-place finish on a wave of popular anger against the government's harsh austerity programs, which have plunged Greece into its fifth year of a devastating recession. The European Union and the IMF had demanded that Greece put austerity measures in place in exchange for hundreds of billions of dollars in bailout funds. Syriza's leader, Alexis Tsipras, says that the bailout terms are...

Francois Hollande vs. Angela Merkel: A looming war over austerity?

The Week — Tue, 08 May 2012 11:30:00 -0500

Francois Hollande will not be inaugurated as France's president until May 15, but German Chancellor Angela Merkel is already pouring cold water on the signature promise of his campaign. Proclaiming that "Germany doesn't decide for all of Europe," Hollande had vowed to renegotiate a German-backed fiscal pact designed to shrink the budget deficits of European Union members by employing harsh austerity measures — spending cuts and tax hikes — that are now taking a heavy toll on voters and slowing economic growth. Merkel says she "will welcome Francois Hollande with open arms," but...

Greece's landmark elections: 5 takeaways

The Week — Mon, 07 May 2012 16:15:00 -0500

Greek voters sick and tired of restrictive austerity measures delivered a "stinging rebuke" to the debt-ravaged country's two main political parties on Sunday, plunging Greece into political turmoil. The two mainstream political groups, the conservative New Democracy party and the Socialist Pasok party, had backed the harsh conditions of the country's European bailout, but now they have lost their majority in parliament, and fringe left- and right-wing parties opposed to the austerity measures won more than 60 percent of the vote. What does this mean for Greece, and for Europe? Here, five key takeaways...

Francois Hollande: Is a Socialist French president a threat to the global economy?

The Week — Mon, 07 May 2012 06:55:00 -0500

François Hollande beat President Nicolas Sarkozy in France's run-off election on Sunday, becoming only the second Socialist Party president elected in post-war France, after François Mitterrand (1981-1995). Sarkozy, for his part, is only the second president in that same period to not win re-election. In his victory speech, Hollande reiterated his vow to renegotiate Europe's recent fiscal austerity–focused pact to save the euro, pledging to shift the EU's economic focus toward growth. "Austerity need not be Europe's fate," he told supporters. But the markets were listening,...

Will anti-austerity voters kill the euro?

The Week — Tue, 24 Apr 2012 13:35:00 -0500

The European public is fed up with austerity. That's the message that is caroming across the continent, as voters express their displeasure with sharp spending cuts that are meant to resolve Europe's debt crisis, but invariably lead to job losses and slow economic growth. Francois Hollande, who has called for less austerity and a greater focus on growth, is in the lead in France's presidential election. The Dutch government, which has been solidly pro-austerity throughout the crisis, collapsed over a right-wing party's objections to austerity in its latest budget. Greece is set to hold elections...

Spain's escalating financial crisis: Is Europe committing 'economic suicide'?

The Week — Tue, 17 Apr 2012 11:10:00 -0500

The European Union might soon find itself in the hairiest stretch of its seemingly endless debt crisis. Spain's borrowing costs are shooting up to heights that are dangerously close to bailout levels, and as the continent's fourth-largest economy, it is "too big to fail — or to rescue," says Robert Zoellick, the outgoing head of the World Bank. Many critics are wondering how EU officials, led by German Chancellor Angela Merkel, allowed the crisis to reach this point, particularly after the European Central Bank (ECB) gave policymakers ample breathing room late last year by flooding the market...

6 reasons Spain could be Europe's next debt-crisis victim

The Week — Fri, 06 Apr 2012 15:58:00 -0500

After a weeks-long lull, the European debt crisis is once again rearing its ugly head. This time, Spain is in trouble, and if you thought Greece was bad, you might want to avert your eyes for this one. Spain's economy is the fourth-largest in Europe, and it's twice as large as Greece, Ireland, and Portugal — all previous bailout recipients — combined. Spain's failure would likely spell the end of the eurozone, the 17 countries that use the euro currency, and would send shock waves through the global financial system. Here, six reasons Spain's economy is in trouble:

1. Rising debt...

After the bailout: Is Greece still doomed?

The Week — Wed, 22 Feb 2012 13:48:00 -0600

This week, the so-called troika of lenders — the European Union, the European Central Bank (ECB), and the International Monetary Fund (IMF) — agreed to extend another massive aid package to debt-plagued Greece, its second since 2010. The $170 billion bailout comes just in time, forestalling Greece's default on a $19 billion debt payment due in March. Many European leaders are breathing a sigh of relief, since a default could have led to chaos in financial markets and the dissolution of the euro currency bloc. But they aren't exactly doing cartwheels in the streets either, because Greece...

Can Europe survive a Greek debt default?

The Week — Thu, 16 Feb 2012 14:42:00 -0600

As last-minute negotiations over Europe's new $171 billion bailout of Greece rage behind closed doors, concerns are already mounting that the rescue package won't be nearly enough to fix the debt-plagued nation's awful financial mess. Some European Union leaders appear resigned to the fact that Greece will eventually default on its debt — a development that would have been unacceptable a year or two ago. Here, a guide to Greece's gloomy prospects:

This bailout is massive — is $171 billion really not enough?
Not if you're as deep in the red as Greece is. Even if Athens secures...