After their holidays spent soaking up the August sun, Europe’s political leaders are bracing themselves for storm clouds this fall.
The latest economic figures show Europe is edging closer to recession, dragged down by crippling debt problems of the 17 countries that use the euro.
Leaders from France, Germany and Greece all meet later this week in the latest round of shuttle diplomacy to attempt to put a lid on the eurozone’s debt crisis.
Six eurozone countries — Greece, Spain, Italy, Cyprus, Portugal and Malta — already are in recession.
Europe’s stumbling economy is hurting recovery in other parts of the world. The European Union recorded a gross domestic product last year of $15.5 trillion — slightly more than the U.S.’s output. It is also a major source of sales for the world’s leading companies. Any further economic problems would be felt in order books back in the U.S. and China.
The eurozone has already provided billions in loans and financial aid to keep Greece, Ireland and Portugal from defaulting on their debts. And now markets are worried that recession-hit Spain and Italy could soon be asking for assistance. Meanwhile, public anger over austerity measures and unemployment is spreading, and a key court ruling on the eurozone’s crucial new bailout fund is due in Germany.
“September is going to be extremely busy,” said Antonio Barroso, an analyst with the Eurasia Group political risk consultancy. “The potential for negative news is there.”
Greece is in its fifth year of recession. The economy is likely to contract another 7 percent this year, and unemployment is nearing 24 percent.
The first batches of a loan worth up to 100 billion euro for Spain’s debt-stressed banks are due to be sent to Madrid from the other 16 eurozone countries in the coming weeks, and Spanish banks are sitting on an estimated 200 billion euro in toxic assets after the collapse of the country’s real estate boom.
Inspectors from the troika, who granted Portugal a 78 billion euro bailout last year, are due back in Lisbon on Tuesday to review how well the country is managing its economy. They will encounter a country that is enduring deep hardship and is likely to need more help.
Investors will be keenly watching France — the eurozone’s second-largest economy — from September when the country’s new Socialist government unveils its 2013 spending plans.
