The economies of four countries of the Eurozone — Greece, Spain, Portugal and Italy are in deep crisis. There are fears that there will be a domino effect on the economies of the rest of Europe, and.the EURO has fallen in relation to the Dollar. GDP statistics reveal that all four economies experienced zero or negative growth in the last quarter of 2009.
The budget deficit of Greece is reported to be 12.7%, more than 4 times the official Euro limit. Following entry into the Eurozone in 2001, Greeks who had a tradition of never borrowing, were encouraged to take loans on credit for summer homes, second cars, and other goods. The Greek government too borrowed heavily from international finance capital. There was a boom in the economy, which lasted till the 2004 Olympics. The Olympics pushed the Greek government to the verge of bankruptcy. For some years after, the rotten state of Greece’s finances was masked because of overall growth of European economy. Now, the European Union is demanding jobcuts, paycuts, increased taxes and other measures of the government of Greece.
The response so far to Greece's plight by the European commission, the European Central Bank and German leader Angela Merkel has been to order Greece’s newly elected Socialist government to impose painful austerity (attack the working class, including the large force of public servants) at an unprecedented rate. George Papandreou, the Greek prime minister, would seem to have little choice but to follow those instructions.
Papandreou complained bitterly of not receiving help from the EU to bail out his country. "Greece is not a political or an economic superpower to fight this alone," Papandreou said that in the eurozone's first big test, Greece had become "a laboratory animal in the battle between Europe and the markets". He criticised other EU members for sending "mixed messages about our country . . . that have created a psychology of looming collapse which could be self-fulfilling".
Spain witnessed unprecedented boom in the years following joining the Eurozone. The sharpness of the downturn since the global financial crisis struck has shocked the Spanish people. Spain's unemployment rate has hit 19.5% – twice the EU average. There are now four million people out of work. More than a million homes have no breadwinner.
Spain is also the only major world economy still in recession, having suffered seven continuous quarters of negative growth. Even the government sees the economy shrinking further this year.
The National debt of Portugal, the poorest country in the eurozone, recently rose to record levels. Portugal's budget deficit is expected to hit 9.3% of GDP in 2010, also a national record, and more than three times higher than EU rules allow. So far, the government has failed to impose cuts in government jobs and a freeze on civil servants' pay, as demanded by the European Union.
In Italy, industrial output plunged by 17.4% in 2009, and many small exporters are fighting for survival. A recent report by the business organisation Confesercenti estimated that the nation's shopkeepers are now paying billions of euros a year to loan sharks – often backed by mafia clans – to cover loans that incur 10% a month in interest charges. Public debt at the beginning of 2010 was the third highest in the world after the US and Japan and is expected to soar to 115% of GDP in 2009.
The governments of Greece, Spain, Portugal and Italy are afraid of running an austerity drive against their own populations, in conditions wherein the working masses are already been hard hit by the crisis. On the streets of Madrid, Lisbon and Rome, as in Athens, the mood of anger is growing and the fight to hold on to hard-won entitlements is already beginning.
Greek unions, among the strongest in Europe, have vowed to fight the "tsunami of attacks on workers". The first in a string of strikes in early February included a 24-hour walkout by civil servants who took to the streets with banners proclaiming "strikes and sit-ins will be our answer to austerity".
"As in every country, Greece is divided between the haves and the have-nots," said Yiannis Panagopoulos, who presides over the Confederation of Greek Workers, the nation's largest trade Union center. "Right now, sacrifices are being sought from the have-nots. We believe that austerity should be asked of those who have, those who made huge profits in the good years and who clearly don't want to contribute to this big national effort to salvage the economy."
In Spain the unions have called for mass demonstrations against proposed austerity measures of the Socialist government. Countrywide rallies have been convened over two weeks, starting on 23 February, in about 10 cities. Half the Spanish workforce have permanent contracts that make them difficult and expensive to sack, while the other half are self-employed, unemployed or subsist on a fragile round of temporary contracts.
Mass demonstrations in Lisbon have already begun. On 5 February, more than 50,000 civil servants protested against a pay freeze. The Portuguese government is also to replace only one of every two government workers who leave, leading to a massive cut in public services.
A general strike is planned in Italy on 12 March to protest against the growing number of layoffs and a major political struggle may be about to begin over the use of Cassa Integrazione, a national fund to which employees and firms contribute. Cash from the fund is used during downturns to pay part of the wages of staff sent home as factories reduce hours or shut down temporarily. Touted by the government as a means of allowing firms to ride out recessions without closing down, the scheme is now paying out to 800,000 furloughed workers.
"The missed work hours paid for by the scheme more than doubled from 2008 to 2009, which is an incredible explosion," said a Union leader. With payments drying up after 36 months, the government has been stepping in to extend the scheme's cover, with 8bn earmarked for 2009 and 2010. But the unions are demanding real jobs and real wages.
If the funds run out, or if more firms just decide it is simply not worth waiting for the rebound and close down, as they are already doing, real unemployment will surge and a season of social unrest could be in store.
In October, 40,000 police officers filled the streets of Rome to demand better pay and new police cars. The average policeman in Italy is now 45 years old, because of a freeze on hiring.