FRANKFURT, Germany — On the eve of Greek elections, Europe’s central bankers are hoping to avert a financial panic by signaling their readiness to support banks.
At the same time, the head of the European Central Bank is calling on nations to pursue steps that could eventually boost economic growth, such as easing corporate regulations.
For now, the stresses gripping Europe from its debt crisis are tightening. Governments are struggling to borrow. Banks are wary of lending to each other and their customers. And nervous depositors are pulling money from Greek and Spanish banks.
Here’s a look at the situations in individual countries:
Britain: The U.K. government and Bank of England unveiled emergency measures late Thursday to help banks and to boost lending to businesses and families. Britain isn’t in the eurozone. But the measures are intended to shield its economy from further damage from the eurozone’s crisis.
One program will offer British banks cheap multiyear loans — provided they pass on the money as loans to households and companies. The central bank will also inject about 5 billion pounds (US$7.8 billion) a month into Britain’s financial system.
Greece: This weekend’s national elections have become the latest focal point in Europe’s crisis. The left-wing Syriza party wants to abandon Greece’s international bailout terms. If that happened, Greece could be cut off from the bailout loans it needs and could face bankruptcy and leave the euro. Jeffrey Bergstrand, a professor of international finance at the University of Notre Dame, said that if the Greek elections end with uncertainty about the results, the ensuing chaos could require intervention to stabilize markets and banks.
Spain: Spain’s public debt load has doubled since 2008, the country’s central bank said Friday. The Bank of Spain said that as of the end of the first quarter, total government debt — central, regional and local governments — stood at 72 percent of gross domestic product. That’s up from 65 percent in the same quarter last year.
The government has said the debt load will hit 80 percent by year’s end. Economists expect it to rise further from its acceptance of a $125 billion loan to prop up its banks. Because the government will be responsible for repaying the banks’ bailout, the loan will compound its public debt.
The International Monetary Fund warned that Spain’s budget deficit was likely to be larger than estimated.
Italy: Italy has been swept up in the anxiety about Spain’s finances. Investors have demanded high interest rates on bonds for fear that Italy might soon need financial aid. The government is saddled with a huge debt load — up to 120 per cent of its GDP. Investors fear it might be unable to maintain that level if its economy deteriorates further.
On Friday, Italy’s government unveiled measures worth $100 billion to try to spur growth and lower its debt. They include selling government property, issuing bonds for infrastructure projects and reducing staff at the Cabinet and in the Treasury Ministry.
Germany: Chancellor Angela Merkel told a group of owners of family-run businesses that she would resist any pressure at the Group of 20 summit to quickly adopt steps such as commonly issued bonds or continent-wide bank deposit insurance. “I argue for addressing the roots and not fighting symptoms,” she said.
