The Eurozone Crisis Explained in 5 Simple Graphs - Debt as a Percentage of GDP
Governments have collapsed. Bailouts have run into the hundreds of billions of euros. Greece is drowning in debt, Italy ousted longtime leader Silvio Berlusconi in a bid to claw its way out, and Spaniards rejected the ruling Socialists, hoping that political change might spare them the woes of their neighbors. Still, the two-year debt crisis builds. How did the eurozone get here?
The graphics below paint part of the picture: untaxed shadow economies, low productivity, and deficit spending. While deficits have been curtailed significantly since 2009 due to austerity measures, some see deeper systemic problems.
Take Greece. “For 10 years, investors basically believed that Greece was Germany,” says Jacob Kirkegaard, of the Peterson Institute for International Economics in Washington. But, he says, Greece is “fundamentally a corrupt, dysfunctional government that is unable to raise enough tax revenue to pay for all of its expenses.” Then there’s Spain. The size of its debt relative to its economy is a manageable 67 percent, but sluggish growth undermines investors’ faith that it can repay loans. Those who lost money in Greece are in no hurry to lose more in Spain.