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European and global debt crises Key points Key points 1) Reckless lending caused by liberalised financial system Key points 1) Reckless lending caused by liberalised financial system 2) Bailout and austerity destroys lives and maintains the crisis Key points 1) Reckless lending a root cause of crisis, caused by liberalised financial system 2) Bailout and austerity destroys lives and maintains the crisis 3) European campaigners for economic justice have to be working on the European debt crisis Key points 1) Reckless lending caused by liberalised financial system EU reckless lending Current account balance 10 Per cent of GDP 5 Germany 0 -5 2000 2001 2002 2003 2004 2005 2006 2007 Greece Ireland Portugal -10 Spain -15 -20 Year Global reckless lending 4.00 2.00 1.00 Current account surpluses -2.00 -3.00 -4.00 2010 2007 2004 2001 1998 1995 1992 1989 1986 -1.00 1983 0.00 1980 Per cent of world GDP 3.00 Current account deficits Global reckless lending Net lending to countries in the South (does not include illicit flows) 4 3.5 2.5 2 1.5 1 0.5 0 -0.5 19 75 19 78 19 81 19 84 19 87 19 90 19 93 19 96 19 99 20 02 20 05 20 08 Per cent of GDP 3 -1 History of crises Government defaults 80 70 60 50 40 30 20 10 0 1901- 1911- 1921- 1931- 1941- 1951- 1961- 1971- 1981- 19911920 1920 1930 1940 1950 1960 1970 1980 1990 2004 Key points 1) Reckless lending caused by liberalised financial system 2) Bailout and austerity destroys lives and maintains the crisis Bailouts and austerity By start 2013, EU and IMF had lent Greece $290 billion – now accounts for 65% of foreign owed debt Per cent of GDP 250 200 150 100 50 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Year 19 70 19 72 19 74 19 76 19 78 19 80 19 82 19 84 19 86 19 88 19 90 19 92 19 94 19 96 19 98 External debt as a per cent of GDP Bailouts and austerity External debt in the global South 45 40 35 30 25 20 15 10 5 0 Year Human impact In Greece, 11 per cent of population now live in extreme poverty; cannot afford a decent diet and enough heating In Spain, Red Cross helped feed 1 million malnourished people in 2012 Impacts: In 1980s Latin America Population living in poverty increased from 144 million to 211 million Africa Population living in extreme poverty increased from 205 million to 330 million Key points 1) Reckless lending a root cause of crisis, caused by liberalised financial system 2) Bailout and austerity destroys lives and maintains the crisis 3) European campaigners for economic justice have to be working on the European debt crisis We have to work on Europe European campaigners for economic justice have to be working on the European debt crisis: • The impacts are huge • We are irrelevant to our fellow citizens if we don’t • The crisis, and response to it, are a central part of the financial system which has dominated the world for 40 years Final point Capital now rushing to the global South again, because of crisis in the North - Some countries using capital controls, eg, Brazil - Some taking opportunity to borrow, eg, Rwanda