Global Economic Crisis
Global Issues in Context Online Collection, 2013.
A global economic crisis developed during the middle of the first decade of the twenty-first century. By
early 2009, it was judged by many observers as the most severe in recent history. Confidence in businesses
around the world declined significantly, with a variety of negative effects. Demand for goods and services
declined, and unemployment rose. Financial firms were at the center of the problem, and in particular those
in the United States that were tied in one manner or another to subprime mortgages, the securitization of
mortgages, and credit default swaps. Governments around the world took action in late 2008 and into 2009
in an attempt to halt and if possible reverse the economic downturn.
Subprime loans are loans made to individuals who do not qualify for market rate loans because of low
income, inadequate or unstable employment history, or poor credit or no credit. Traditionally, banks
hesitated to give home loans to such individuals because they posed a greater risk of defaulting on their
mortgage payments—a risk that the banks bore. In recent decades, however, banks began selling mortgages
to investors as securities (called mortgage-backed securities, or MBS). These were seen as safe because
they pooled together thousands of mortgages. Historically most homeowners, even subprime borrowers,
pay their mortgages on time. So even if a small percentage out of the thousands involved in an MBS
defaulted (did not pay their mortgages) the MBS would still be valuable because the rest of the mortgages
would be bringing in payments. Investors could purchase MBSs and receive the financial benefit as
homeowners paid their loans. They also carried the risk: if too many homeowners defaulted their payments
would be less than expected. The banks that issued the mortgages profited from selling them as MBS, but
having sold them no longer carried any risk. They began to make riskier home loans.
Many subprime loans contained adjustable rate mortgages, whereby the interest rate on the loan resets after
a certain period. Many borrowers either did not understand that their rate could increase or assumed they
could refinance later at better terms after their home's value increased. During 2006, however, home prices
decreased in many parts of the United States. Interest rates also increased, after spending several years at or
near historic lows. Some homeowners with adjustable rate mortgages could not make the higher mortgage
payments that resulted, and were unable to sell their homes for enough to pay their mortgage off. They
began to default on their mortgages at unexpectedly high rates. The suffering among homeowners was
severe. Foreclosures increased dramatically, rising 79 percent between 2006 and 2007.
Subprime lenders suffered as foreclosures affected their cash flow. During 2007, billions of dollars of
invested in MBSs evaporated. In April 2007, New Century Financial, the second largest subprime lender in
the United States, declared bankruptcy because the company was unable to pay its creditors. In August
2007, Sachsen Landesbank, a German subprime lender, neared collapse before a larger bank acquired the
company.
As the problems in the housing sector continued, financial firms across North America and Europe suffered
losses and many people began to lose confidence that their investments in these companies and their
products were safe. A contributing factor to this was the use of credit default swaps. Many financial
institutions used CDSs that were tied in some way to housing prices and MBSs. A CDS is a contract that
operates much like an insurance policy on a security (like an MBS) or a business. It specifies that the issuer
of the CDS will pay the buyer a sum if a specific event, such as a bankruptcy, occurs. In return the buyer
pays the issuer a regular fee. Unlike an insurance policy, CDSs are not regulated by government. A
business can issue a CDS even if it does not have sufficient assets to pay its obligation if the event the CDS
insures against take place. Concerns arose that companies might not be able to make good on their CDS
obligations. No one could know for sure which firms these might be, because the terms of the CDSs were
all private, but the total amount of money in the system was enormous. In September 2008, the U.S.
Securities and Exchange Commission (SEC) estimated that the global CDS market involved $58 trillion—
almost three times the amount invested in the U.S. stock market.
The overall effect of the housing market and CDS problems was that individuals and businesses became
very cautious in where they invested or lent money. This created a so-called credit crunch. In August 2007,
BNP Paribas, the largest Eurozone bank, warned investors that they would be unable to withdraw money
from several funds because of an evaporation of market liquidity. BNP Paribas' warning indicated that the
effects of the subprime crisis had spread to the financial markets and limited the willingness of banks to
lend to each other.
Throughout the autumn of 2007, major commercial and investments banks announced massive losses
related to investments in subprime-backed securities. The U.S. Federal Reserve, the European Central
Bank, and the central banks of several European countries injected hundreds of billions of dollars into the
international banking system throughout late 2007 and early 2008 in order to ensure market liquidity. Even
with the injection of capital into the banking sector, several banks were unable to find the capital needed to
remain solvent. The British government nationalized (placed under government control) troubled Northern
Rock bank in February 2008. In March 2008, the U.S. Federal Reserve facilitated the sale of U.S.
investment bank Bear Stearns to JPMorgan Chase.
Subprime losses continued during 2008 and credit tightened even further. In September 2008, the global
financial crisis intensified sharply, triggering major government responses around the globe. On 7
September 2008, the U.S. Treasury announced that the federal government was placing Fannie Mae and
Freddie Mac into conservatorship. These two firms are government-sponsored enterprises that are
responsible for nearly one half of all mortgages in the United States. On 15 September 2008, Lehman
Brothers, a U.S. bank and financial services firm, declared bankruptcy, the largest bankruptcy filing in U.S.
history. On 16 September 2008, the U.S. Federal Reserve effectively took control of AIG, the largest
insurance company in the United States, after acquiring an 80 percent stake in the company in return for an
$85 billion loan the company needed to continue operating. On 25 September, Washington Mutual became
the largest bank to fail in U.S. history. European and Asian financial markets also suffered greatly.
The events of September 2008 emphasized that a major crisis was taking place and brought increased
pressure on governments around the world to take action. On 3 October 2008, the U.S. Congress passed a
massive $700 billion bailout package designed to remove bad debts from the books of financial institutions
and restore liquidity and confidence in the financial system. European banking and insurance giant Fortis
was partially nationalized (taken over by the government) on 28 September 2008. By the end of October
2008, all three major banks of Iceland had failed and been nationalized and in the United Kingdom three of
its largest banks were nationalized in a £37 billion bailout. In mid-October, South Korea announced a $130
billion package to stabilize its financial institutions. The Bank of Japan injected $45 billion into Japan's
banking system. The Indian central bank made $8.2 billion available to Indian banks. Despite these efforts
the international economy continued to slide.
Global stock markets fell substantially as investors lost faith in the markets and sought safer investments.
By mid-October 2008, the Dow Jones Industrial Average, a leading U.S. stock index, had fallen nearly 40
percent from its record high set in 2007. Major European indexes suffered similar declines from their 2007
highs. In Asia loses were even more severe, for example the Chinese Hang Seng Index and Shanghai Comp
Index fell 53 percent and 67 percent, respectively, from October 2007. The Indian Sensex Index fell 55
percent, while the Japanese Nikkei Index was down 54 percent from its record high.
In the wake of the crisis, many banks had little or no money to loan. Obtaining a loan, therefore, became
more difficult or more expensive. Individuals could not borrow money to purchase homes or automobiles,
and businesses could not borrow money to purchase inventory on credit or to meet such financial
obligations as paying loans or payroll. As a result, retail sales of durable goods fell dramatically and
unemployment spiked as companies of all sizes were forced to lay off employees to trim costs.
By early 2009, most economists declared that the majority of the world's economies were in recession—a
period of prolonged economic decline that affects gross national product, wages, employment, and other
economic indicators. The U.S. economy was determined to have been in recession since December 2007.
Some commentators warned of a possible depression, referencing the terrible economic problems which
hobbled the world economy throughout the Great Depression of the 1930s. In February 2009, U.S.
president Barack Obama (1961–) signed into law a $787 billion economic stimulus package called the
American Recovery and Reinvestment Act, which included expanded unemployment benefits, aid to states,
tax cuts, and massive government spending on infrastructure projects, education, and health care.
In April 2009, the leaders of the G-20 nations met in London, England, to discuss a coordinated response to
the crisis. The G-20 consists of major industrialized and developing nations from around the world. At the
conference, the G-20 leaders agreed to measures that amount to $1 trillion of additional stimulus spending
to boost the world economy. They also announced that they would cooperate in reforming the financial
industry, including instituting regulation of previously unsupervised sectors like hedge funds. The hope was
that this would help to restore confidence in the financial industry and prevent a repeat of the crisis in the
future.
By August 2009, many economists were cautiously optimistic that the recession was easing, despite an
unusually high national unemployment rate of 9.7 percent and double-digit unemployment rates in many
states. In several European countries, the situation was even worse; Spain's unemployment rate, for
example, hit 18.1 percent in August 2009. Many economists, however, describe unemployment as a
"lagging indicator" of economic health and warn that unemployment may remain high for some time, even
as other economic indicators improve.
Figures released by the U.K. Office for National Statistics in late October 2009 showed that the British
economy had shrunk by 0.4 percent in the third quarter of 2009. The U.S. economy, however, grew by 0.9
percent, its first expansion in more than a year. Since a recession is technically defined as the contraction of
the economy for two quarters in a row, any economic growth—even zero growth—in one quarter signals
the end of the recession. The U.S. growth rate announced in October 2009 was better than economists had
expected, though many point out that unemployment remains high. However, in late November 2009, the
U.S. Department of Commerce revised its forecast for 2009 economic growth downward from a predicted
3.5 percent to 2.8 percent.
The Irish Republic, which was hit harder than many European nations by the economic downturn,
announced in December 2009 that financial figures for the third quarter showed a 0.3 percent rise in gross
domestic product, meaning that the recession was officially over. However, the country undertook
extremely sharp cuts in government spending to balance its finances, and joblessness remained high.
After much deliberation, the European Union (EU) announced on 11 February 2010 that it would develop
an aid package to Greece, which had been close to defaulting on massive debt obligations. EU and world
leaders insisted that a financial support package for Greece would avert a wider financial crisis that could
affect all of Europe and possibly the United States too. The exact nature of the rescue package, however,
was debated for months. The euro plummeted against the dollar in March 2010 as worries about Greece,
coupled with a credit downgrade for debt-ridden Portugal, raised concerns that the EU's financial recovery
might be threatened by a new debt crisis. Bad news about Greece's financial position kept coming in April
2010. It was then revealed that the country had a far larger 2009 budget deficit than had been previously
reported. The lack of reliable financial information provided by Greece caused concern and hesitation
among the investors it turned to for funding. By late April, the International Monetary Fund (IMF) and the
EU announced that the long-awaited rescue plan for Greece's economy would soon be finalized.
On 10 May 2010, U.S. stocks made their biggest gains in more than a year after the EU announced a one
trillion dollar relief package for European countries struggling with sovereign debt. The European Central
Bank agreed to purchase some government and private debt and to conduct other "interventions" to ensure
"depth and liquidity" in the markets. The one trillion dollar package included more than three hundred
million dollars from the IMF. Meanwhile, Spain struggled with its own economic crisis, introducing
"austerity" measures to cut public spending. The proposed spending cuts were not enough to satisfy the
IMF, however, which demanded that the Spanish government reform the labor market and ease
unemployment. At 20 percent, Spain has the EU's highest unemployment rate, and the country's credit
rating was downgraded by two major ratings agencies in May and June.
On 9 June, the Finnish government announced that Finland's economy had dipped back into recession after
a weak recovery in 2009. In the fourth quarter of 2009, the economy contracted by 0.2 percent, and in the
first quarter of 2010 the economy contracted by 0.4 percent. Economists around the world have expressed
concern about the possibility of this kind of "double dip" recession throughout Europe and in the United
States. (A double dip recession occurs when a second period of recession follows a brief recovery from an
earlier recession). Meanwhile, Brazil's financial figures for 2010 revealed the country's economy is
expected to grow by between 6 and 6.5 percent in 2010.
Spain's efforts to satisfy the IMF by reforming the labor markets met with push-back from labor unions in
June 2010. Spanish unions announced plans for a general strike to begin 29 September in response to the
government's plan to cut 15 billion euros from the budget. Labor leaders said the proposed reforms harm
the rights of workers and benefit businesses.
On 30 June 2010, the U.S. House of Representatives voted 237–192 to approve financial industry reform
legislation that would create a consumer protection agency at the Federal Reserve and require new
regulation and oversight of U.S. financial institutions. The legislation was approved by the Senate on 15
July and was signed into law by Obama the same day. Meanwhile, the European Parliament passed tough
rules on executive compensation, capping pay and tying banker bonuses to the longterm financial
performance of their companies. The new rules must be approved by the European Council before they can
go into effect.
On 8 July 2010, the IMF announced it was revising its global economic growth estimates for 2010
upwards—from 4.2 percent to 4.6 percent. Modest growth in developed economies and robust growth in
Brazil, India, and China were cited as the causes for the revision. In the United States, meanwhile, a
Commerce Department report showed that the nation's economy was still growing, but more slowly than
had been hoped. The U.S. economy grew by 3.7 percent in the first quarter of 2010, but growth slowed to
an annualized rate of 2.4 percent in the second quarter. The slower growth has led economists to worry that
high unemployment rates will persist for the foreseeable future. Indeed, the U.S. Labor Department report
in August 2010 showed a spike in new unemployment claims, with 500 thousand new claims being filed in
the week of 14 August. It was the highest weekly number in nine months. The report added to speculation
that the United States may be heading toward a double dip recession, though most economists considered
that scenario to be unlikely, as the U.S. economy appeared by several measures to be improving. In
September, the United States Department of Commerce said its figures for July showed the trade deficit
had fallen to 14 percent due to strong sales of U.S. exports.
The Greek economy continued to contract sharply in the second half of 2010, despite the IMF and EU
rescue plan. The Greek economy shrank by 1.5 percent in the second quarter of 2010. The country's gross
domestic product is expected to shrink by 4 percent by the end of 2010.
Dwindling tax revenues and falling exports led many nations around the world to adopt so-called
"austerity" measures in 2010. Announced cutbacks in government spending and social benefits were met
with widespread public sector strikes and street protests in several European countries. Hundreds of
thousands of people walked off the job on two separate occasions in France in September to protest the
government's plan to raise the retirement age from 60 to 62. On 30 September, the government of Ecuador
was very nearly toppled by an apparent coup attempt by police who were angry at the government's cuts in
bonuses and promotions. President Rafael Correa (1963–) was physically attacked as he tried to negotiate
with national police gathered in the streets of Quito. He was forced to flee to a nearby hospital. Correa
declared a state of emergency. Ecuador's state-run oil industry was hit hard by the global economic crisis
and, despite rebounding oil prices, has yet to recover to its pre-2008 levels.
EU leaders met in a two-day summit in October 2010 to discuss measures for preventing future debt crises
in Europe, such as the one faced by Greece. France and Germany offered a joint plan called the Deauville
Deal that would establish a permanent rescue fund and impose sanctions on debtor nations. The plan would
require a change to the EU's governing treaty, which would be difficult and time-consuming. Meanwhile,
Ireland—which, like Spain, Portugal, and Greece, struggled to manage its debts in 2010—announced more
than $21 billion in budget cuts to reduce its ballooning budget deficit and manage its debts effectively.
Although economists at the European Central Bank agreed that the cuts were necessary, they warned that
such sharp reductions in government spending would likely stifle economic growth.
By 18 November 2010, it looked increasingly likely that Ireland would require financial assistance in the
form of a multi-billion-euro EU-backed loan. Patrick Honohan, head of the Irish Central Bank, said that
although the Irish government had not requested aid, representatives of the IMF, the European Central
Bank, and the EU had scheduled meetings with Irish officials. Irish prime minister Brian Cowen responded
to Honohan's comments by insisting that the outcome of the coming talks had not been determined.
However, by 22 November, Irish officials announced that Ireland had indeed requested and accepted a
bailout consisting of a package of loans totaling eighty to ninety billion euros aimed at propping up Irish
banks.
A meeting of the World Economic Forum, commonly called "Davos" after the Swiss city in which its
annual meetings are held, got underway in January 2011. A major topic of conversation was the continuing
threat of debt default of EU member nations and the implications this might have for the euro. Some
participants favored handling such debt crises on a country-by-country basis, while others advocated the
establishment of a Eurozone bond that would, in effect, amount to a subsidy for less wealthy nations.
Billionaire and investment expert George Soros and economist Nouriel Roubini warned that bailouts of
Ireland and Greece would fail unless their debts were restructured. Shortly after Davos, yields on
Portuguese government debt reached new highs, reflecting concerns that Portugal might also require
financial assistance to cover its debts. Moody's, a credit rating agency, downgraded Portuguese debt on 16
March and warned of further downgrades as the Portuguese government faced stiff opposition to its
planned austerity measures.
A report by the IMF prepared for a meeting of G-20 finance ministers in February 2011 said that a
weakening of the U.S. dollar could help the United States reduce its massive current account deficit and
"rebalance" the global economy. The depreciation of the dollar, accelerated by the Federal Reserve's
decision to authorize a round of "quantitative easing" in late 2010, has caused alarm in such countries as
Brazil and India, where an inflow of foreign investment has caused sharp currency appreciation and
inflation.
Portugal's government collapsed on 23 March 2011 after the austerity plans backed by José Socrates
(1957–), who leads a minority government, were voted down by his opposition in parliament. Socrates
vowed to resign if the measure failed, and he did so. His resignation prompted new credit rating
downgrades for Portugal and a warning from European Commission president José Manuel Barroso
(former president of Portugal) that Portugal must enact austerity measures in order to restore world
confidence in its economy. On 7 April, Portugal officially requested an EU bailout. Economists say
Portugal will likely need between $107 billion and $130 billion.
On 18 April 2011, ratings agency Standard & Poor's (S&P), downgraded the credit outlook of the United
States from "stable" to "negative," citing the country's enormous deficit as a major reason for the change.
S&P said there was a one in three chance that the AAA credit rating of the U.S. would eventually be
downgraded. A credit downgrade would make it more difficult for the U.S. to borrow money and finance
its debt.
The subject of U.S. debt remained in the news in May as lawmakers wrangled over the issue of the U.S.
debt ceiling, the limit set by Congress on how much money the government can borrow. The current ceiling
is $14.294 trillion and, as of early May, the government hovered within $14 billion of that limit. The debt
ceiling has been raised seventy-four times since it was first established as a spending-control measure in
1917. It has been raised ten times since 2001. This time, however, Congressional Republicans have insisted
that any increase in the debt ceiling must be accompanied by major spending cuts. Democrats have accused
Republicans of playing a dangerous political game that puts the economic well-being of the United States
at risk. If the debt ceiling is exceeded, the United States could default on its debts which, U.S. Treasury
Secretary Timothy Geithner has argued, would have a devastating effect on the U.S. and world economies.
Federal Reserve Chairman Ben Bernanke echoed Geithner's warning in testimony before the Senate
banking committee on 12 May, saying that, at best, failure to raise the debt ceiling could rattle stock
markets, drive up interest rates, and hurt the economy and, at worst, severely destabilize the U.S. economy.
Greece continued to struggle financially in the first half of 2011. On 2 June, Moody's rating agency
downgraded the country's credit rating again. According to Moody's calculations, there is a 50 percent
chance that Greece will default on its debts within the next five years. Even as public sector workers went
on strike once more to protest possible job cuts on 9 June, Greece's cabinet endorsed a set of budget cuts
designed to meet EU preconditions for further aid to Greece. German Finance Minister Wolfgang
Schaeuble announced on 8 June that the 2010 bailout of Greece was insufficient and that more money
would be needed to put the country's economy in order.
In June, tens of thousands of protesters gathered in Athens to voice objection to Greece's planned austerity
measures, and unions organized strikes across the country. Greek prime minister George Papandreou
(1952–) reportedly offered to step down during intense discussions over the economic crisis, but vowed on
16 June to continue to work to seek consensus on an economic reform package. The Greek parliament
passed the reform legislation, including the controversial austerity measures, on 30 June, clearing the way
for a new infusion of EU bailout funds in July. On 5 July, Portugal found itself in new financial difficulty
when Moody's downgraded the country's bonds to "junk" status. Ireland was next: Moody's downgraded its
bonds to "junk" status on 14 July.
Despite Greece's adoption of austerity measures, it was clear that the country needed further financial
assistance to avoid financial collapse. European leaders met in Brussels on 21 July 2011 to discuss a new
rescue package for Greece. Part of the plan involves restructuring Greek debt by getting banks and private
investors to agree to swap old bonds for new ones with much later maturity dates. The problem with this
plan is that it will likely cause ratings agencies to apply the "selective default" rating to Greece, which
makes it ineligible for Eureopean Central Bank (ECB) support. However, the plan made progress when the
ECB dropped its objection to allowing Greece to go into "selective default" on some of its debt.
Negotiations over how best to help Greece avoid debt default continued among EU finance ministers and
heads of state throughout 2011 and into 2012.
While Greece struggled with its debt, the United States also endured a debt drama—this one largely
concocted by politicians. Under U.S. law, there is a legal limit to the amount of money the government can
borrow, and Congress must approve any debt increases above that. Such debt increases have been approved
routinely for decades with little controversy; however, during 2011, newly elected conservative members of
Congress insisted that no debt increase would be approved without cuts in government spending. The U.S.
Treasury warned that if the debt ceiling was not raised by 2 August 2011, the United States might default
on some of its debts, which, according to economists, would have dire consequences for the domestic and
global economies. Weeks of negotiation between Republicans and Democrats produced little progress
toward a compromise, and the 2 August deadline drew ever closer. Finally, on 2 August, a deal was pushed
through Congress and the debt ceiling was raised. Though default was averted, Wall Street was not
comforted. The Dow Jones Industrial average plummeted 370 points on 4 August. On 5 August, Standard
& Poor's downgraded the credit rating of the United States for the first time, from AAA to AA+. The credit
downgrade sparked a wildly bumpy week for the U.S. stock market, which plunged 634 points on Monday,
8 August, spiked 429 points on 9 August, fell again by 519 points on 10 August, then rose again by 423
points on 11 August. The Dow Jones Industrial average closed the week with a net loss of 1.5 percent.
In mid-September, a protest campaign called "Occupy Wall Street" began in a park in southern Manhattan
near Wall Street. The protesters gathered to demonstrate against what they perceived as the destructive
impact of the financial industry on average U.S. citizens and the general lack of negative consequences
experienced by the financial institutions that emerged intact from the global financial crisis. The movement
gathered celebrity support over its first few days, and toward the end of September similar protests began in
Chicago, Boston, and San Francisco. By 30 September, several labor unions, including the New York
Transit Workers Union, the United Federation of Teachers, Workers United, and Service Employees
International Union, offered their support to Occupy Wall Street. Union members marched to Wall Street in
a show of solidarity with protestors on 5 October.
As similar protests began in other U.S. cities, the movement attracted international media attention. It also
attracted criticism for its lack of cohesion, clear goals, or central demands. While not explicitly endorsing
the protests, President Obama remarked at a White House press conference on 6 October, "The American
people understand that not everybody's been following the rules, that Wall Street is an example of that." On
15 October, a global "day of rage" demonstration took place in cities in eighty countries around the world
as a show of solidarity with the Occupy Wall Street protesters. Protests in Oakland turned violent on 3
November. Several thousand peaceful protesters effectively shut down the city's busy port on 2 November;
during the night, however, as protesters attempted to take over an abandoned public building, police in riot
gear moved in. In the clash that ensued, police fired tear gas and some protesters threw rocks, pipes, and
small handmade explosives. Several people were injured. By January 2012, most of the encampments had
been cleared.
Nevertheless, the anti-establishment sentiment seemed to have spread, even to the highest echelons of one
of Wall Street's leading establishments: Goldman Sachs. In March 2012, Greg Smith, a Goldman Sachs
executive in charge of the firm's London-based European derivatives business, wrote a scathing editorial
published in the New York Times in which he described Goldman Sachs as "toxic." Smith claimed that he
quit his job as a matter of "conscience."
Beginning in early 2012, several indicators showed improvement in the U.S. economy. According to
Kelley Blue Book, auto sales surged in the first three months of the year; new claims for unemployment
benefits fell to their lowest rate since March 2008; and tourism spending by foreigners visiting the United
States increased by 8.1 percent in 2011, according to the Commerce Department.
The European Union, meanwhile, remained embroiled in an ongoing debt crisis. The sharp reductions in
public spending—so-called austerity measures—enacted by some European nations produced strong
reactions by voters in 2012. In early May, French president Sarkozy lost a re-election bid to socialist
François Hollande (1954–), who vowed to roll back some of the financial changes put in place under
Sarkozy (for example, the controversial raising of the retirement age from 60 to 62). Greek parliamentary
elections held on 6 May produced inconclusive results, with radical members from both ends of the
political spectrum unable to form a working government. Greece's parliament will be dissolved to make
way for new elections in June. Many economists have argued that the question of whether Greece should
remain in the Eurozone will be a key aspect of the upcoming election. Greeks themselves are sharply
divided on the issue, with anti-capitalist and anti-German sentiment running high. Many Greeks blame
Germany, the EU's economic superpower, for forcing the Greek government to accept untenable austerity
measures. Nevertheless, the majority of Greeks, according to opinion polls, want to remain in the
Eurozone.
The Eurozone as a whole seemed poised to slip into a so-called double-dip recession (two periods of
recession with a very short period of economic recovery in between) in the first quarter of 2012. However,
an unexpectedly robust German economy compensated for slumps in Greece, Italy, and Spain, allowing the
Eurozone to eke out a 0.5 percent rate of economic growth in the first three months of 2012.
The IMF made another warning of a slowing global economy in the beginning of 2013, citing continuing
problems in the Eurozone as one of the top reasons. According to the IMF, the Eurozone's economy is
expected to decrease by 0.1 percent in 2013. The IMF predicted that the global economy will grow by only
3.5 percent in 2013, down 0.1 percent from the forecast made in October 2012.
Statistics in February revealed that the Japanese economy contracted by 0.1 percent during the last quarter
in 2012; it was the third quarter of decline in a row. The decline was surprising, as analysts had predicted
growth of 0.1 percent. The Japanese trade deficit in January 2013 reached a record high of 1.6 trillion yen
($17.1 billion), up 10 percent from January of 2012.
COPYRIGHT 2013 Gale, Cengage Learning
Source Citation
"Global Economic Crisis." Global Issues in Context Online Collection. Detroit: Gale, 2013. Global Issues
In Context. Web. 12 July 2013.
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