The economic crisis that has shaken the world may have started in Wall Street but it has been made much worse by the actions of both the European institutions and European member states. Much of the so-called debt crisis was caused not by states spending too much, but because they bailed out the banks and speculators. EU government debt had actually fallen from 72% of GDP in 1999 to 67% in 2007. It rose rapidly after they bailed out the banks in 2008. Ireland’s bank bailout cost them 30% of their national output (GDP) and pushed debts to record levels.

By blaming the crisis on government spending, politicians and bankers argued that the only solution was to cut public spending, but this has actually worsened the debt crisis. Austerity measures have led growth to collapse across the EU. In Greece, GDP fell by 7.3% in the second quarter of 2011. Austerity has reduced governments’ capacity to pay back spiraling debts, leading to even higher debts. And, as speculators encouraged doubts on certain countries’ abilities to pay, the rates of interest soared – as happened to Greece, Ireland and Portugal – making the debts completely unaffordable.

{phocadownload view=file|id=68|text=Click here to download a PDF booklet “The EU Crisis – A Pocket Guide”|target=s}