MELISSA BLOCK, host: From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.
MICHELE NORRIS, host: And I'm Michele Norris. The recent market crashes have investors worried about a relapse, or maybe a replay of the crisis that shook the global economy three years ago. Like in 2008, world markets have collapsed together, and quickly. But the crisis of 2008 was centered in the banking system. It involved subprime mortgages and other financial products.
This time, the crisis has more to do with politics and not just in the U.S., as NPR's Tom Gjelten explains from Madrid.
TOM GJELTEN: It wasn't the size of the budget deficit that prompted S&P to downgrade U.S. credit last week. It was the inability of the parties in Congress to get a better agreement to reduce the deficit. The ratings agency cited political paralysis in explaining its downgrade decision. That same issue could also explain why credit agencies have a problem with Spain.
VICENTE JIMENEZ: (Spanish language spoken)
GJELTEN: Vicente Jimenez, the managing editor of El Pais, Madrid's leading newspaper, says getting a consensus between the political parties in Spain has become mission impossible. That's not good. Like in the U.S., economic progress in Spain will depend on building a political consensus behind a reform program.
But Jose Ignacio Wert, one of Spain's leading public opinion experts, says recent polls suggest the Spanish people are down on all their political leaders.
JOSE IGNACIO WERT: The government has the lowest confidence rate in the modern history of Spain. But it's also about the political establishment as a whole.
GJELTEN: It's a similar situation in Italy. European leaders last week made Prime Minister Silvio Berlusconi promise a balanced budget, in exchange for help financing Italy's huge debt. That will be a tall order for him and the rest of the Italian government.
All over Europe, this new debt crisis is totally wrapped up in politics. Jose Manuel Barroso, the president of the European Commission, opened a summit of European heads of state last month with a challenge: If the euro monetary zone is to be saved, the richer countries will have to show solidarity with the poorer ones.
JOSE MANUEL BARROSO: They have said they will do what it takes to ensure the stability of the euro area. Well, now is the time to make good on that promise.
GJELTEN: Again, a political challenge to Europe's leaders.
Three years ago, it was the world's banks whose credit standing was damaged. Governments in Europe and the U.S. came to banks' rescue, backing them up with their own good credit. This time, it's the European governments themselves - particularly those on the periphery of the continent - whose credit is in jeopardy.
JOHN AUTHER: If there is a solution to this, it will be a political one.
GJELTEN: This is an online video commentary by John Auther, who directs the Lex column in the Financial Times newspaper.
AUTHER: If politicians can work out a way of convincing the world that the full eurozone stands behind all the countries at the periphery, then there need not be a crisis in those sovereign credits but obviously that is a huge political task.
GJELTEN: And getting huger by the day. Politicians in Berlin say they oppose this idea of putting Germany's credit behind the weak governments in the south - that's critical. The German Parliament will need to approve a eurozone rescue effort, just as the Italian and Spanish Parliaments need to approve reform packages in order to be rescued.
Whether in Washington or Europe, there could hardly be a worse time for political systems to turn dysfunctional - but that's exactly what's happening. And it worries El Pais editor Vicente Jimenez in Madrid.
JIMENEZ: (Spanish language spoken)
GJELTEN: We can someday escape our economic problems, Jimenez says, but when your democratic institutions deteriorate, it's very hard to rebuild them. In fact, if your democracy deteriorates, you may not escape your economic problems any time soon.
Tom Gjelten, NPR News, Madrid.
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