Ensayo

European economy guide
Polarised prospects

May 10th 2012, 17:21 by The Economist online

[pic]Source: European Commission

THE euro crisis flared up in early April after three months ofrelative calm as banks got a trillion-euro helping hand from the European Central Bank. Spanish bond yields jumped on fears that Spain – the fourth biggest economy in the euro area - might be forced tofollow much smaller Greece, Ireland and Portugal in being bailed-out by the rest of the euro area and the IMF. Our interactive graphic (updated May 10th 2012) lays bare the economic and fiscal faultlinesthat make the crisis so intractable.



Although the whole of the euro area is now in recession, the reverse is much more severe in southern than in northern Europe. Forecasts for 2012 showGreece faring the worst, with GDP falling by over 4%, a crippling blow after already suffering four years of recession. Portugal will also take a knock as national output declines by more than 3%. Onereason why investors have been fretting about Spain is that they fear that austerity will prove counter-productive in an economy already on its back. By contrast, Germany and France will manage to grow(though only a little) and the one northern country to take much of a hit will be the Netherlands.



Unemployment shows a similar north-south divide, with the overall jobless rate above 20% inSpain and Greece but only about 6% in Germany. For young people, the disjuncture is even more acute, with rates below 10% in Germany and Austria but above 50% in Spain and Greece and 35% in Portugal.Unemployment this high not only exacts a terrible social cost but also threatens to undermine public support for fiscal retrenchment.



Yet austerity is the harsh medicine being administered to theperiphery in an attempt to deal with parlous public finances. Government debt at the end of 2011 was above 100% of GDP in Greece, Ireland, Italy and Portugal and budget deficits have also been most...