Europe Is Recovering From Global Meltdown

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When the U.S. financial crisis officially began a year ago, it quickly spread throughout the world — starting in Europe. European leaders are gathering in Pittsburgh for the G-20 meeting, determined to change the financial system that allowed the crisis to happen.


As we've been hearing this morning, world leaders are gathering in Pittsburgh today to try to nurture the global economy back to health, talk about their next steps. European leaders will be key in that, and this morning, Eleanor Beardsley takes a look at how Europe has been affected over the past year.

ELEANOR BEARDSLEY: An economic crisis born in the USA soon washed up on European shores as real estate bubbles in Spain, the UK and Ireland burst, and a few Belgian banks went under. Europeans quickly discovered just how many of their banks were holding Uncle Sam's toxic assets. As in the U.S., confidence waned and money dried up. But despite the many similarities, the crisis has played out differently in Europe because of its more conservative financial environment says Paul Swain, an economist with the Organization for Economic Cooperation and Development or OECD.

Mr. PAUL SWAIN (Economist, Organization for Economic Cooperation and Development): Europeans haven't felt it as early as Americans did. One reason for that is that the housing market in the U.S., of course, got way out of balance in the - several years ago with subprime mortgages and so on. That didn't happen in most of Europe, because in most of Europe banks are conservative. If you want to buy a house, you need a 30 or 40 percent down payment. And it's very rare that European would take equity out of their house by refinancing a mortgage.

BEARDSLEY: European banks have had other problems says Swain, like the German and Austrian banks that lent heavily to Eastern European nations which are unable to repay their debt. One buffer against the raw edges of the crisis has been the continent social safety net. Unemployment benefits in many countries last for up to two years and can provide up to 65 percent of one's salary. And even if you do lose your job, you don't lose your health care coverage.

The main affect of the crisis has been unemployment, but the reaction to it has been much angrier here than in the U.S. In France, irate employees have kidnapped their bosses at companies like Caterpillar, 3M and Sony to protest the layoffs. And recently, workers at a tire factory being shutdown in Eastern France brought their angry demonstrations to downtown Paris, burning tires in front of the stock exchange.

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BEARDSLEY: Such actions may seem violent to Americans but they have popular and even political support here. There is widespread feeling that swindlers and greedy traders started this crisis but it's the working man who is paying the price. Tire factory worker Burton Lenoir(ph) sums up popular sentiment.

Mr. BURTON LENOIR (Tire factory worker): (Through Translator): We've been betrayed and they're trying to pull one over on us. But we're not idiots. The way we workers will survive this crisis is to unite and show these people that they rolled the dice and lost, and they're the ones who are going to pay for this crisis, not us.

BEARDSLEY: Even though unemployment has risen in most European countries, the increase hasn't been as steep as in the U.S. That's because many governments here have taken an active role in saving jobs says the OECD's, Swain. For example, German GDP has fallen four percent over the last year as its export markets dwindled, but unemployment has only gone up one percent.

Mr. SWAIN: What that means is lots of German employers are keeping on workers even though they don't really need that many workers to keep production going. One reason for that is that the German government, in fact, provides quite large subsidies to employers. If instead of laying off workers, what they will do is put a large workforce on part-time instead.

BEARDSLEY: Such measures to tie a country over during a downturn can be successful if the recession doesn't last too long, say economists. And there are already signs that the crisis may be waning. The continents two largest economies, Germany and France showed modest growth between April and June and have officially pulled out of recession.

For NPR News, I'm Eleanor Beardsley in Paris.

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