It was six years ago now that we saw what was one of the largest economic declines, recessions and depressions in the developed nations in fifty years. We saw not only businesses, banks and insurance companies faced with having to close their doors, but entire countries were in economic ruin. The terms “too big to fail” and “billion dollar bailout” became second nature. Suddenly, everyone had heard and was asking what a Ponzi scheme was, and banker bonuses in the multiple millions were transparent and coming under scrutiny. What has changed since then?
The news reel has certainly changed its tune, now focusing on world terrorist organizations, communist leaderships, the environment… but what happened to those nations that seemed to be on the brink of bankruptcy every day? Are they recovering?
We’ll start with Greece — a little nation who had a fabulous lifestyle for its citizens, largely on the government dime, until 2008. A moderately high income nation, they were hit hard with government job cuts, pension fallouts, and extreme austerity measures required just to be compliant with the largest ever government-debt restructuring with the private sector in history. Having a national debt burden of 355.14 billion Euros ($503 billion CAD), equaling over 170% of the nation’s GDP. That’d be like your annual household income being $100,000, but you owe $170,000 on credit cards. With austerity measures, they were able to bring that debt down to 280 billion Euros by the first part of 2012. Last week, Greece reported a growth in their GDP… meaning they are recovering and out of their recession this year for the first time since 2008.
So what about other nations hit hard by the economic downturn? Italy is still feeling the pains of the downturn, and despite having peeked out of the recession a few times, they’ve not been able to remain there and have slipped into their third recession since 2008.
France and Germany have been successful in remaining at the top of the European economies, dodging the “triple dip recession” that Italy couldn’t avoid.
One nation that took a different approach to the economic crisis is Iceland. Having only a $14 billion economy (GDP), Iceland decided that its banks were “too big to save,” and refused to provide financial assistance causing them to default on $85 billion owing. This measure allowed the government to continue and even improve on its social services for the increase in unemployment when jobs in the banking sector and others were lost. Governments forced banks to write off mortgage debts to help households, and have invested in steering the small nation out of its economic crisis. It now has only 4% unemployment, on course to reach only 2% (after peaking at 12% post-crisis), proving that letting banks fail can sometimes be the more effective plan.
So where does Canada sit in all of this? Having fared better than most nations affected in 2008, we weren’t as hard hit because of the banking and insurance regulations that were already in place. However, being a majority export nation, our growth remains reliant on the growth of our export partners. Thankfully, the US, one of our largest export nations, is experiencing growth. Internally, Canadians have lowered their household debt (likely a result of the low interest rate environment) but employment is still low in many areas hit by industry closure over a half decade ago.
Despite the economic recoveries not being “sexy” enough to hit the headlines of the day’s news reel, it’s good to know that there is global economic recovery happening in some nations hardest hit by the economic crisis in 2008. This doesn’t begin to cover ALL the nations affected, but is a highlight of some who were making the biggest headlines not too long ago.