Europe's Economic Crisis: What You Need to Know
Senior Editor, CNBC
has been three years in the making, and its outcome is uncertain.
Crushed by debt and distressed banks, countries like Greece, Spain, and Ireland face ongoing recessions, while Germany and the Netherlands along with members of the International Monetary Fund , push for austerity measures.
There's more than enough reason for concern. The economy of the European Union, which holds the 17 nations that use the euro currency and 10 others, is a larger economic bloc than the United States or China.
To help clarify the situation, here's a look at what's happening now, with updates as they happen, and a look at the major players.
Week of June 18:
Parties committed to Greece's bailout secured a majority on Sunday while leftists who had vied for first place conceded defeat in an election that could keep the debt-laden country in the euro zone.
The conservative New Democracy party held a 2.9 point lead after 97 percent of the ballots were counted. New Democracy had 29.7 percent of the vote, while the leftist Syriza party was running second with 26.9 percent.
How this plays out is still to be determined. Despite the election results, at least on analyst told CNBC that Greece could still leave the euro.
Any hopes Italy and Spain may have had that the Greek election result would ease pressure on their own debt crises were dashed early on Monday when financial markets reacted as if nothing had changed. The cost of borrowing rose for both countries, the two big euro zone economies under fire for poor finances, widening the gap between what they have to pay and what Germany pays.
Week of June 11:
Greeks head to the polls on Sunday, June 17, for a national election with many sayingthe fate of the euro and the recovery of the global economy could rest in their hands. But the biggest pain could be felt closer home as the country suffers through a fifth year of recession.
The last published opinion polls showed the conservative New Democracy party, which backs the 130 billion euro ($160 billion) bailout that is keeping Greece afloat, running neck and neck with the leftist Syriza party, which wants to cancel the rescue deal. (see more on Greece below).
Greeks have been withdrawing cash out of banks to the tune of some $1 billion so far, and stocking up with food ahead of a cliffhanger election on Sunday that many fear will result in the country being forced out of the euro.
Spain's credit rating took another hit on Wednesday. It was downgraded by rating agency Egan-Jones "CCC+" from "B." This is mainly due to Spain getting a bailout for its banks indicating a need for more money to run the country. The downgrade Spain's borrowing costs will go up.
Euro zone finance ministers agreed on Saturday (June 9) to lend Spain up to 100 billion euros ($125 billion) to shore up its teetering banks; Madrid said it would specify precisely how much it needs once independent audits report in just over a week.
Italy is also back in the headlines (see below for more on Italy) as a result of the loan to Spain, over fears the Spanish bailout won't stop the crisis from hitting Italy's already staggering economy.
Because Italy does not have enough economic growth to generate money, the government will probably have to borrow it at high interest rates, adding to an already heavy debt load.
The Major Players
As of June 5, Germany indicated it was prepared to accept a 'deal' that would provide greater support for the most indebted euro zone partners in exchange for more centralized control over government spending in Europe.
This is important because Germany has the strongest economy in Europe, and the fourth largest in the world, and plays a leading role in the crisis under Chancellor Angela Merkel—whom many consider the de facto leader of the European Union.
Germany's leadership is said to be 'vital to salvaging the euro as a single currency and stopping a debt crisis that's rattled markets and threatened the global economy.'
Others say Germany has gone way too far in imposing austerity measures on countries like Greece and Ireland.
Criticism of Germany’s handling of the debt crisis goes back to 2010, with some analysts blaming the German government for not stepping in soon enough with aid to stop the Greek crisis.
But Germany has been the biggest contributor in terms of money for bailouts and that has caused some controversy with some Germans—saying they have given enough money to help their fellow Europeans.
Greece, Spain, Portugal and Italy