September 2, 2010
Concern that Greece's debt crisis might presage similar episodes elsewhere in the euro zone has not disappeared, despite a €750 billion ($990 billion) backstop agreed in May 2010 in concert with the IMF. Sovereign-bond spreads (the extra interest compared with bonds issued by Germany, the safest credit) have drifted back up in a handful of other countries, notably Ireland and Portugal. Attempts to tackle budget deficits through public spending cuts and tax increases have offered some reassurance to bondholders, but have also held back GDP growth.
The interactive graphic above illustrates some of the problems that the European economy faces. In 2009 of the 27 countries in the European Union only Poland saw its economy expand. GDP perked up in most countries in the first half of 2010. Germany was especially sprightly in the second quarter. The economies of Austria and the Netherlands have been dragged up in Germany’s wake. But GDP in Greece has slumped, and has been sluggish in Portugal and Spain.