Current World Event's Report - Essay Example

Despite, or perhaps in spite, of these problems, the European Union maintains that it will only provide additional bailout funds to those who can follow its austerity and reporting measures. The people from these troubled economies are unhappy, as unemployment rates soar, and reject the austerity measures that directly negatively impact their lives. Many have taken the streets, while some have committed suicides (Joy, 2012). The economic situations in Greece, Portugal, Spain and Italy are affecting the economic condition of the European Union (EU) and the globe, while increasing political tension and social unrest in the region.

The economic situation of the European Union’s region and the globe are interconnected, and so the economic problems in Greece, Portugal, Spain and Italy are having widespread financial consequences. Dario Perkins of Lombard Street Research stated that the economic output fell by 20% since the crisis began: “If you look at what Greece is going through, it's comparable with the Great Depression” (Stewart, 2012). As the world reels away from the slow recovery of the 2008 global financial crisis, several European countries are in for the worse, as they enter Depression-like conditions.

The EU responds with a bailout program, but not without strings attached. The bailout funds include austerity measures that will cut into social welfare: “Economides explained that the projected cuts could break down into 11.5 billion euros worth of cuts -- from pensions and wages as well as the sale of state property…” (Joy, 2012). Reduced social welfare will further make it hard for ordinary citizens to deal with their impoverished conditions. As for the infamous “Grexit,” if Greece chooses to leave the EU, this may be best for the region’s credit standing, but it will break the euro currency (Shann, 2012).

It will prove that the concept of the euro is unsustainable, when countries have not fully integrated their “regulation, labor markets, welfare payments and taxes for resources to move quickly to equalize competitiveness” (Shann, 2012). In addition, the widespread bailouts to the banks are not going as faster as it should, according to the news (Shann, 2012). As a result, depositors are transferring their investments and deposit funds in other countries: “Depositors would transfer funds abroad in case these countries left the euro and devalued” (Shann, 2012).

The statistics show the amount of funds outflowing from countries that need the money the most: “A total of $425 billion was pulled from banks in Spain, Portugal, Ireland and Greece in the 12 months ended July 31, according to data compiled by Bloomberg” (Onaran, 2012). The pullout means business for other countries, but spells further economic problems at the Euroland, as it assists the former nations deal with their banking conditions. The wearing off of deposits is compelling banks in those countries to pay more to keep them “The average rate for new loans to nonfinancial corporations in July was above 7 percent in Greece, 6.

5 percent in Spain and 6.2 percent in Italy, according to ECB data,” when “It was 4 percent in Germany, France and the Netherlands” (Onaran, 2012). With dwindling funds being sucked in the banking sectors, the funds needed to revitalize the economy and provide employment are not forthcoming. As these countries further experience economic problems, their politics and populace are at a