The Euromess in one graph
This is, pretty much, the Euromess in one graph. Before the euro zone, countries like Greece and Germany borrowed money at wildly different rates. After they joined together in the euro zone, they all borrow at the same rates — German rates — which meant the market thought their debt was essentially riskless. Then came the global recession, and the market began to realize that the economic prospects for Greece and Ireland and Portugal and Italy looked quite dim, and it was increasingly hard to see how they could generate the growth necessary to pay back their debts without undertaking crushing austerity programs — austerity programs that would, in turn, hurt their growth prospects, and make it even harder for the countries to recover. That’s the catch-22 Europe is in right now, and it’s the single biggest headwind the global economy faces in 2012. In fact, as the next graph shows, it’s the single biggest headwind our economy faces in 2012.
Source: Der Spiegel