Global economic crisis

In 2008-2009 much of the industrialized world entered into a deep recession. The complex of vicious circles which contributed to this crisis included high oil prices, high food prices and the collapse of a substantial housing bubble centered in the United States, which sparked an interrelated and ongoing financial crisis. Around the world, many large and well established investment and commercial banks suffered massive losses and even faced bankruptcy. It has been argued that the huge increases in commodity and asset prices came as a consequence of an extended period of easily available credit and that the primary cause of the downturn was exceptionally financial. This crisis has led to increased unemployment, and other signs of contemporaneous economic downturns in major economies of the world.

The recession is the worst since the Great Depression of the 1930s. However, so far many economists and politicians have avoided using the term depression, as it is generally recognized to refer to a downturn which lasts significantly longer and has a considerably higher unemployment rate.

While beginning in the United States the late 2000s recession spread to Europe rapidly and has affected much of the region which several countries already in recession as of February 2009, and most others suffering marked economic set backs. The global recession was first seen in Europe as Denmark was the first country to fall in recession.

2.Eurozone

In the eurozone as a whole, industrial production fell 1.9 percent in May, the sharpest one-month decline for the region since the exchange rate crisis in 1992. European car sales fell 7.8 percent in May compared with a year earlier. Retail sales fell by 0.6 percent in June from the May level and by 3.1 percent from June in the previous year. Germany was the only country out of the four biggest economies in the eurozone to register an increase of activity in July though the increase was sharply down. Economic analysts from RBS and capital Economics say the decline raises the risk of the eurozone entering a recession in 2008. In the second quarter, the eurozone's economy was reported to have declined by 0.2 percent. The economy declined again in the third quarter putting the eurozone in a technical recession.

- Ireland

Analysts have predicted Ireland's economy will contract further in the rest of the year. A report from NCB Stockbrokers predicts gross national product will fall by 1 percent in 2008 and by 0.4 percent in 2009 due to a decline in multinationals hit by the global economic slowdown. An economist from NCB said non-residential investment would fall by 5 percent in 2008 and by 12 percent in 2009. In January 2009 it was forced to nationalise its third largest bank, Anglo Irish Bank and to announce recapitalisation of its top two banks, AIB and Bank of Ireland. In February 2009, the government announced record unemployment levels in the country, with its highest monthly increase in 40 years and 1,500 people being laid off daily. Students rallied against the government, with 15,000 partaking in one march to protest against the reintroduction of university fees two days after former Taoiseach, Bertie Ahern was attacked, booed and jostled by an angry mob in Galway.

-Spain

Spain's Martinsa-Fadesa, a construction company, has declared bankruptcy as it failed to refinance a debt of - 5.1 billion. The two banks with most exposure to Martinsa-Fadesa are reportedly Caja Madrid, at - 900m, and Banco Popular Espatol, at - 400m. Spain's finance minister Pedro Solbes has said it would not bail out the company. In the second quarter in Spain house prices reportedly fell 20 percent. In Castilla-La Mancha some 69 percent of all houses built over the past three years are still unsold. Deutsche Bank said it expects a 35 percent fall in real house prices by 2011. Spain's premier, Jose Luis Zapatero, blamed the European Central Bank for making matters worse by raising interest rates. More than 98 percent of home loans in Spain are priced off floating rates linked to Euribor, which has risen 145 basis points since August. Housing accounts for over 10 percent of Spain's economy. The Bank of Spain is concerned about the health of smaller regional lenders with heavy exposure to the mortgage market.

Although Spain has avoided recession in the first half of 2008, unemployment in the country has risen by 425,000 over the past year, reaching 9.9 percent. Car sales in Spain fell 31 percent in May. Spain's factory output slumped 5.5 percent in May. The country's business lobby Circulo de Empresarios warned of a "high probability" that

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-FINANCIAL NEWSPAPER