The economic crisis in the euro zone is “far from over,” German Chancellor Angela Merkel said in her New Year message and in definite contrast to what her finance minister, Wolfgang Schaüble, had said the day before.
Along with other prominent politicians and officials, Schaüble had declared that the “worst of the financial crisis” has passed. But on Friday, Merkel said that “the economic environment next year will not be easier, but more difficult.”
She added that this reality “should not discourage us, but — on the contrary — serve as an incentive” to press forward with reforms including increased monitoring of financial markets. But with many euro zone economies struggling to return to growth (or even not to slip further into recession), and public anger against austerity measures apparent in protests and strikes that have become routine in, it is no wonder that Merkel acknowledged that “many are also heading into the new year with trepidation.”
Recent developments in five of the euro zone’s 27 member nations suggest why.
1. Spain Is Still In a Recession
Many contend that the government has bailed out the country’s banks at the expense of ordinary Spaniards who have turned out for protests. There have been numerous reports of people who, unable to pay their mortgages, have jumped from their balconies rather than face eviction and of others squatting in abandoned building projects. Unemployed adults, teenage children in tow, have been left homeless and moved in with elderly parents whose pensions have become the family’s only source of income.
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2. France’s President Hollande Is Struggling With a Struggling Economy
The joyously heralded election of Socialist François Hollande as president has soured amid France’s ongoing economic woes. The country’s gross domestic product is down with its economy barely growing in the third quarter of 2012. The unemployment rate is at at 10.3 percent and, while not as high as Spain’s and Greece’s, it has been growing for the past 19 months.
Hollande has seen France’s highest legal body overturn his 75 percent millionaire tax, leading to doubts about how quickly France will pull itself out of the crisis. With more than 3 million out of work, he has pledged to reverse the jobless rate “within a year, whatever the cost.”
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3. Greeks Are Cutting Down Trees in Parks For Fuel
As 2012 ended, the Greek government was able to acquire yet enter round of bailout funds from the “troika” of the European Commission, the European Central Bank and the International Monetary Fund at the eleventh hour. Greece remains burdened by government corruption (exemplified in the revelation of who was on a list of wealthy Greeks with Swiss bank accounts — the mother of former prime minister George Papandreou has been linked to a 550 million account) and an inefficient tax collection system. According to troika officials, the Greek state will not be able to collect four-fifths of what it is owed, due to a chronically inefficient tax collection system and many people still not having paid their 2012 taxes.
The long-running crisis has more than taken its toll on Greek society where people have been discarding euros and resorted to bartering. Support has grown for the far-right Golden Dawn party which has been linked to anti-immigrant violence. Due to “sky-high” fuel prices (because of a monopoly among energy providers), Greeks have been burning wood (sometimes obtained by illegally chopping down trees in parks in northern Athens and elsewhere) to heat their homes, resulting in a growing cloud of smog over cities. Public schools in central and northern Greece may have to close due to a lack of funds for fuel.
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4. Former Yugoslav Republic of Macedonia (FYROM) Erupts in Protests
This small country bordering northwestern Greece is in a “dire economic crisis“; its economy entered a recession last year in part because of Greece’s ongoing financial problems. With a 31 percent unemployment rate, some 4,000 Macedonians have been protesting in the capital of Skopje in late December and called on the conservative government to resign. The demonstrations have been organized by the opposition Social Democratic Union of Macedonia party, which charges that the government’s budget (equivalent to $3.2 billion) is “unnecessary spending.” At least eight protesters were injured in rallies on December 24.
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5. Italy’s Scandal-Plagued Berlusconi Returns to Politics
The delicate line politicians that seeking to solve their countries’ debt burdens must walk has been apparent in Italy. In December, the technocrat Mario Monti resigned as prime minister after the conservative Party of Freedom led by former prime minister Silvio Berlusconi withdrew its support from the coalition government.
Even with scandals involving underage prostitutes and allegations of corruption still clinging to him, Berlusconi has announced he will run again for political office. Monti has yet to indicate whether he will run against him, leading to rising uncertainty about what lies ahead for Italy, whose economy is the third-largest in the euro zone.
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