Home Eurozone Understanding the European Crisis Now – Graphic

Understanding the European Crisis Now – Graphic

by Ozva Admin

*Except Greece,

what is it for march













The situation in Europe could be worse were it not for a system that was created to clear transactions between central banks. That system now provides loans to the central banks of countries whose banks are suffering withdrawals. The money comes from the central banks of nations with healthier banks, such as Germany, the Netherlands and Luxembourg.

Germany already has substantial exposure to weaker economies, which is one reason it has been reluctant to agree to issue pan-European bonds.



April 2012*

gross ratio


gross debt

domestic product

April 2012 estimates

Projected economic growth rates for 2012

Two rescue funds have been created for countries that need help. The problem with funds is that they are essentially a form of self-insurance. Since their creation, the funds have made loans to Ireland, Portugal, Greece and now to banks in Spain. As countries become debtors, they withdraw as guarantors, placing more financial demands on other European countries.

. . . hundreds of billions

In Aid has fallen short.

Countries that adopted the euro were supposed to adhere to strict spending standards to prevent their debt from growing too high. They agreed to a debt target of 60 percent of their economic output.

Some did, but others, with significant social safety nets, were not so frugal. They could finance their deficit spending at relatively low interest rates as long as the European economy remained healthy.

But when the financial crisis hit, economies shrank and their debts skyrocketed. Investors began to lose faith in the ability of these countries to pay their debts.

with many countries

Mired in debt. . .

The best and perhaps only way for Europe to recover from its financial problems is to get its economies growing rapidly again. That could ease some of the pain that has caused political and social unrest.

Unemployment rates in many countries are very high. In Spain and Greece, the rates are comparable to those in the United States during the Great Depression.

Although the banks of many European countries have long been larger than the economies of their home countries, they are now in some cases more than twice the size.

The loan portfolios of many of these banks have deteriorated substantially. And many banks had taken on debt to lend more than they had on deposit.

With loans in bad shape, banks need to shore up their capital. But investors no longer want to lend them money. And depositors, fearing the banks won’t survive, have been transferring their money to banks in stronger countries, like Germany.

The debt crisis and government efforts to rein in spending have further weakened many economies. The crisis hit some of the smaller economies first, but is now threatening larger ones like Spain and Italy.

In the short term, the economic outlook is poor with many peripheral countries in deep recession.

. . . and so many people

Jobless . . .

Many of Europe

The economies are

Weakening. . .

. . . and the banks of it,

that dwarf their

Economies are suffering.

(In conjunction

with the EFSF)


Monetary Fund

european financial

Stabilization Mechanism

european financial

Stability Facility

Trans-European automated real-time gross settlement express transfer system

Monthly balances, in billions of euros

Countries are scaled

to the relative sizes of

their debt ratios

The countries are

scaled to the

relative sizes of

their unemployment rates

Countries are scaled

to the relative sizes of

your bank assets, and

are comparable to those

sizes of economies

The countries are

scaled to the

relative sizes of

their economies

Gross domestic product

2012 estimates,

in billions of euros

bank assets

April 2012, in billions of euros

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