Business, Finance & Economics

An economically divided Europe

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(Image by Flickr user Dean Shareski (CC: by-nc-sa))

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Story by Gerry Hadden, PRI's "The World"

The Euro is falling, and falling fast. Europe's dominant currency hit a ten-day low against the dollar yesterday. 

The finance ministers of the 16 Eurozone countries met in Brussels to grapple with a built-in problem: All the Eurozone countries use the same currency, the Euro; but each nation runs it's own economy. 

Some countries such as France and Germany have climbed out of the recession, others have not, and that's putting a strain on the Euro and the Eurozone governments.

Five Eurozone countries in particular are struggling with negative growth, high unemployment and soaring debt. Economists refer to them by the unfortunate acronym, PIIGS -- that's Portugal, Italy, Ireland, Greece and Spain. 

Spain is now Europe's poster child for what happens when your economy relies too much on construction. The crisis sparked by Spain's housing crash over two years ago only worsens. Unemployment here is running nearly 20 percent, double the European Union average. Among young workers, age 16 to 24, it's an astounding 43 percent. 

These days, says 21-year-old Juana Maria Perello, young Spaniards can either study or sit around. She's studying medicine in Barcelona and desperately needs a job on the side to pay for classes.

She says in Spanish, "I've been trying to find something through all the temporary agencies but there’s no work. I'd like to be a nanny or caretaker, or wait tables on the weekends. I've left my resume everywhere, but they don't even answer.

Perello is on track to become a doctor, but most of Spain's now unemployed youth were working at menial jobs before the crisis, in the service sector or in construction. 

Spanish economist Alfredo Pastor says that doesn't bode well for the future. "I think it would be better to spend a little less money on public works and a little more money on training. Because otherwise when the public works are finished then there, we'll be in the same situation. But no I don't see any quick fix."

Spain's difficulties come at a bad time for Europe. Spain just assumed the rotating presidency of the European Union. As such, it's supposed to lead the group out of this crisis. 

Spanish Prime Minister Jose Luis Rodriguez Zapatero has already stirred controversy by proposing sanctions on countries that don't get their economies in order. Never mind that Spain itself would likely get fined.

At an EU meeting last week a Spanish reporter questioned whether Spain had enough credibility to suggest such a measure.

Prime Minister Zapatero took offense. "What an odd question," he huffed. 

But several European partners, including Germany quickly, dismissed Zapatero's sanctions idea as invasive. For the moment it appears the Eurozone's overall economic strategy is each man for himself. Nowhere is that more apparent than in dealing with the Zone's most beleaguered member, Greece. 

Greece is dangerously close to defaulting on its staggering debt, but Europe's Central Bank and other EU states say they're not willing to come to its rescue. Europeans, it seems, have had enough of bailouts for the time being.

Greece's Prime Minister, George Papandreou told CNN that his government is determined to right its economy alone. "We have wide tax evasion; we also have a lot of waste. I would say clientelism and corruption -- these were some of the basic platforms on which we came into power by the will of the Greek people who want change."

But to make that change the Greek government has proposed cutting social spending by 10 percent. That's led to weeks of street protests.

Fears of social unrest have undermined international confidence that Greece can in fact cut spending. And while Europe's Central Bank won’t inject emergency cash into the Greek economy, it dismisses the idea of booting Greece from the Euro zone should it's crisis deepen. So the Euro club stays intact as the Euro weakens. It's down about five percent against the dollar over the last month.

PRI's "The World" is a one-hour, weekday radio news magazine offering a mix of news, features, interviews, and music from around the globe. "The World" is a co-production of the BBC World Service, PRI and WGBH Boston. More "The World."