LONDON (AP) — Europe’s governments are struggling to deal with a mountain of debt made worse by the past three years of global financial and economic turmoil.
Here are thumbnail sketches of how some of the countries involved are faring — and what they’re doing to escape the crisis.
2009 debt: 115.8 percent of gross domestic product
Deficit: 5.3 percent of GDP.
2010 growth estimate: 0.8 percent.
2011 estimate: 1.0 percent.
Unemployment: 8.6 percent.
Italy has piled up lots of debt but so far has been spared the troubles plaguing Greece. Bond markets are still willing to lend at affordable rates in the belief the country will make good on its debts.
Still, rising market pressures on other countries has forced Prime Minister Silvio Berlusconi’s government to announce spending cuts to reassure bond investors the country’s finances are under control.
That surprised Italians after they had been assured for months by Berlusconi and his aides that Italy would escape the government crisis without painful measures.
Berlusconi announced €25 billion ($30 billion) in budget cuts for 2011-2012 to reduce the deficit to 2.7 percent of GDP by 2012. The cuts target the country’s bloated bureaucracy and aim to recoup some of the estimated €120 billion Italy loses to due widespread tax evasion.
While welcoming the measures, Italy’s main industrial lobby Confindustria said they don’t do enough to spur Italy’s perennially sluggish growth.
2009 debt: 115.1 percent of GDP.
Deficit: 13.6 percent.
Deficit projection for 2010: 8.1 percent.
2010 growth estimate: minus 4.0 percent.
2011 estimate: minus 2.6.
Unemployment: 12.1 percent
Europe’s problem child, Greece spent itself into trouble with a bloated public sector and widespread tax evasion, then lied about the shape of its finances. In October, a new government shocked markets by announcing the debt was 12.5 percent of GDP, more than four times the previous government’s estimate. It has subsequently revised up to 13.6 percent.
Revelations that past governments had fudged statistics further undermined market confidence. As a result, bond markets hammered Greek debt and refused to lend to Greece at an affordable rate.
Prime Minister George Papandreous’s government was forced to take a €110 billion bailout from the eurozone countries and the International Monetary Fund to avoid defaulting in May. Many economists think Greece will eventually have to restructure its debts despite the bailout because of its weak economic growth.
Debt is projected to peak at 149.1 percent of GDP in 2013 before beginning to fall the following year. Greece faces the double challenge of massive debt, which stands at about 310 billion euros, and the harsh austerity measures imposed in order to release the eurozone-IMF rescue loans are expected to dampen consumer spending.
With no particular industrial output to speak of, Greece is a heavily consumer-based economy, so the recession will further hamper the government’s efforts to pull itself out of its debt crisis. Tourism, one of its main industries, is already suffering after television images of Greeks rioting over austerity plans.
2009 debt: 96.7 percent of GDP
Deficit: 6 percent.
2010 growth estimate: 1.3 percent.
2011 estimate: 1.6 percent.
Unemployment rate in March: 8.1 percent.
Belgium’s reliance on trade has hurt the economy in the last two years ago, but the recent recovery in European exports — many routed through the busy port of Antwerp — has helped the economy return to growth. However, the country’s persistent budget deficits and uncertainty over political reforms that could transfer more power from the federal government to the regions mean that it may face problems curbing a debt mountain that will top 100 percent in 2011.
2009 debt: 78.1 percent of GDP.
Deficit: 7.5 percent of GDP.
2010 growth estimate: 1.4 percent.
2011 estimate: 2.5 percent.
Unemployment: 10.1 percent.
Five months after unveiling a euro 35 billion “Big Loan” aimed at spurring France’s moribund economy to life, French President Nicolas Sarkozy announced this week that tackling 30 years of accumulated deficits is now a “national priority.”
A three-year spending freeze, combined with a crackdown on tax loopholes and other measures are now promised as a way of bringing France’s deficit under the 3 percent threshold enshrined in EU rules by 2013. Of cource, Sarkozy once promised to achieve that by this year, but that was before the crisis.
French government forecasts of 2.5 percent growth from 2011 onward are optimistic compared to estimate of only 1.7 percent growth from the Organization for Economic Cooperation and Development, a grouping of developed countries.
2009 debt: 76.6 percent of GDP
Deficit: 9.4 percent of GDP
2010 growth estimate: 0.5 percent
2011 estimate: 0.9. percent
Unemployment: 10.5. percent
Portugal’s economy, burdened by low education levels and labor laws that make hiring and firing difficult, has been struggling to get traction since the turn of the century, with growth averaging less than 1 percent since 2000.
Traditional industries such as textiles and footwear have shrunk under global competition while tourism, which generates 10 percent of economic output and jobs, has slumped amid the global economic crisis.
The minority center-left Socialist government is trying to develop high-tech sectors such as renewable energy but as a small country of 10.6 million people Portugal is dependent on growth in its European trading partners for an export recovery. It is also trying to increase trade with developing nations, especially Angola, its former colony, and Portuguese-speaking Brazil.
The government predicts the national debt it will peak at 90.1 percent of GDP in 2012 before falling back.
2009 debt: 73.2 percent of GDP
Deficit: 3.1 percent of GDP
2010 growth estimate: 1.4 percent
2011 estimate: 1.6 percent
Unemployment: 8.1 percent
Germany, the eurozone’s biggest economy, cut its budget deficit to zero in 2008 but then saw it return last year in the wake of the global financial crisis. The government says this year’s deficit will be above 5 percent, but it has pledged to get back below 3 percent by 2013.
The constitution has a “debt brake” that forces the government to cut back borrowing over the coming years.
Germany’s recovery has been heavily reliant on exports, and domestic demand has been a weak point for years. Chancellor Angela Merkel started her second term last October pledging tax relief to boost the economy but her new center-right government delivered only a modest package of measures.
Merkel pushed hard to make sure the European Union’s bailout of Greece was accompanied by promises of harsh cutbacks, and some accused her of making the crisis worse by delaying. Bailing out Greece was unpopular at home, and Merkel’s party suffered a state election defeat in May that deprived her government of a majority in the upper house of parliament.
Merkel declared that further tax cuts won’t be possible until 2013 and the emphasis will now be on keeping debt under control. She hasn’t yet detailed possible spending cuts but has indicated that education will be spared.
IRELAND: 2009 debt: 65 percent of GDP.
Deficit: 14.3 percent.
2010 growth estimate: minus 0.7 percent.
2011 estimate: 3.0 percent.
Unemployment: 12.6 percent.
Ireland enjoyed Europe’s longest sustained growth from 1994 to 2007 amid unprecedented investment by foreign high-tech firms seeking a low-tax base in the European Union.
But the Celtic Tiger boom collapsed amid the global credit crisis, which exposed the country’s reckless reliance on foreign lending and property speculation to fuel spending. In its annual budget in December, Ireland slashed pay for state workers, cut welfare benefits and imposed new environmental taxes on fuel as part of a record €4 billion ($6 billion) in budget cuts to combat the runaway deficit.
It was rewarded for the budgetary constraints with far lower market borrowing costs than Greece. The Irish government said recently it is on track to cut its deficit to be in line with the European Union’s limit of 3 percent of GDP by 2014.
2009/10 estimated debt as percentage of GDP: 62 percent.
Deficit: 10.4 percent.
2010 growth estimate: 1-1.5 percent.
2011 estimate: 3-3.5 percent.
Unemployment: 8 percent.
Public finances in Britain, which does not use the euro, have shown signs of slowing deterioration in recent months, but remain at record levels.
Britain does have some advantages over countries like Greece: it prints the currency in which its liabilities are denominated, so it can devalue and make its exports more competitive. It is considered a surer bet for repayment, maintaining a triple-A credit rating. Still, the new coalition government headed by Prime Minister David Cameron of the Conservative Party has made cutting debt its priority to get the country “back open for business.”
Britain was hit particularly hard by the global credit crunch because of its huge financial sector, and the government carried out a multibillion pound bailout of major banks even as levels of personal debt soared among consumers. Like the US, it also faced a collapsed real estate bubble.
The European Union has warned that Britain’s deficit is likely to hit 12 percent of GDP this year, four times what the bloc considers acceptable. Debt is expected to reach 88 percent in 2011 or 2012, overtaking the EU average.
2009 debt: 61 percent of GDP
Deficit: 3.4 percent of GDP
2010 growth estimate: 1.5 percent.
2011 estimate: 2.0 percent.
Unemployment: 5.9 percent.
The Netherlands went into the financial crisis with the best national finances it had seen in decades, and all main parties committed to pruning the welfare state — with different emphases. The country has a competitive, open economy, natural gas resources, and is a net exporter, especially of agricultural goods.
But its unusually large financial services sector led to an abrupt spike in national debt largely due to bailouts during the crisis.
Although the Dutch are in an anti-Europe mood and many would love to see the return of the guilder, policymakers recognize that but for its euro-membership, the Netherlands might well have wound up like Iceland and seen its currency and banking system collapse.
Dutch national elections are scheduled for June 9, and major battlegrounds include whether the retirement age should be raised to 67 from 65 and whether to scrap the tax deduction on mortgage interest. Anti-Islam politician Geert Wilders is trying to halt a big slide in the polls by arguing that non-Western immigrants cost the country €7 billion per year.
SPAIN: 2009 debt: 55.2 percent of GDP
Deficit: 11.2 percent of GDP
2010 growth: minus 0.3 percent.
2011 estimate: 1.3 percent.
Unemployment: 20.05 percent.
Spain is grappling with the twin woes of a moribund economy and a lopsided deficit that is triggering fears of a Greek-style debt crisis. The government has cut spending to chip away at the deficit, but acknowledged that this will also chop half a percentage point off its forecast for growth in 2011, down to 1.3 percent. And there are doubts over whether that level of growth can generate net employment and ease the 20 percent jobless rate. Before the economic crisis, Spain relied heavily on free-flowing credit and a red-hot construction sector.
Now it is search of a new growth model and there are no obvious solutions. Business leaders and many economists say the government must reform the stodgy labor market to encourage employers to hire and restore a climate of confidence.
(This version CORRECTS Corrects figure for German deficit to 3.1 percent sted 3.3 pvs)