The Financial Crisis Pushes Europe to the Brink of Disaster

By Danny Schechter, AlterNet. Posted March 12, 2009.

KREMS, Austria -- Obsessed as we are about our own crumbling economy, it's hard for most Americans to see and appreciate the global nature of the crisis and how it is impacting, and will impact, others throughout the world. We don't recognize how many in other countries blame the fall of their own economies on a kind of "financial AIDS" born in the USA.

Protests are spreading through the European continent. Britain has put its own army on alert for fear of disruptions this summer by anarchists bent on class war with slogans like "burn a banker." Mass demonstrations show no sign of abating in France, Iceland, Ireland, Greece and other EU countries.

People here have politicized economic issues, perhaps because of a more thorough and diverse media environment, as well as an expectation that their governments have a duty to protect their people.

When I arrived in Vienna, Austria, for a film forum and festival at the Danube University, I was surprised to see merchandise and remainders marked down to flea-market prices in the usually pricey booths at an airport known for peddling luxury brands.

Some think the European Union and the euro zone may not survive the tremors. European Commission President Jose Manuel Barroso said on Friday: "The European Union is facing an unprecedented situation due to the economic crisis and needs to work at different levels to restore credit flows." He said the bloc's economy is expected to contract by 2 percent this year.

General Motors, with 32,000 jobs at risk, wants a bailout from European governments, too.

Eastern Europe is feeling the crunch the worst, with its currencies reeling. One such example is Hungary, which was once a model for how the free market can replace Soviet-bloc economics. Western Europe has so far declined to meet their requests for more bailouts.

There are also waves of protests under way in the east. Left publications report:

... thousands of demonstrators in Lithuania, Latvia and Bulgaria have attacked government buildings and called on their governments to resign as unemployment soars in Eastern Europe.

Experts predict a regional increase of 15 million to 18 million unemployed in the coming months, with no relief as jobs for immigrants disappear in Western Europe and the United States. 

Mike Whitney writes:

The global economy is decelerating at the fastest pace on record. Forty percent of global wealth has been wiped out. The banking system is insolvent, unemployment is soaring, tax revenues are falling, the markets are in shock, housing is crashing, deficits are soaring and consumer confidence is at its lowest point in history.

When you look at some of the numbers, you can see the time bombs that are ticking away. According to Ed Bonawitz, many countries are in deep shock: "Ireland's external debt, at $1.8 trillion, equals 900 percent of the country's $200 billion GDP. The United Kingdom's external debt of $10.5 trillion equals 456 percent of its $2.3 trillion GDP. Switzerland's external debt of $1.3 trillion equals 433 percent of its $300 billion GDP. Now that the credit markets are locked tight, renegotiating the terms of these loans is virtually impossible." U.S. banks are said to have a loan ratio of around 26-to-1, and European Banks have one that is around 60-to-1.

F. William Engdahl writes:

The problems in Eastern Europe, which are just now emerging with full force are, if you will, an indirect consequence of the libertine monetary policies of the Greenspan Fed from 2002 until 2006, the period where Wall Street's asset-backed securitization Ponzi scheme took off.

The riskiness of these Eastern European loans is now coming to light as the global economic recession in both east and west Europe is forcing Western banks to pull back, refusing to renew loans or 'rollover' the credits, leaving thousands of borrowers with unpayable loan debts. The dimension of the Eastern European emerging loan crisis pales anything yet realized …

According to my well-informed City of London sources, the new concerns over bank exposures to Eastern Europe will define the next wave of the global financial crisis, one they believe could be even more devastating than the U.S. subprime securitization collapse, which triggered the entire crisis of confidence.

See more stories tagged with: global, economy, eastern europe, western europe, financial crisis

Danny Schechter writes the News Dissector blog for Media Channel. His latest book is Plunder: Investigating Our Economic Calamity (Cosimo Books).

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