Examples include the rise of the Tea Party and the loss of Democratic majorities in subsequent elections. The crisis in Europe generally progressed from banking system crises to sovereign debt crises, as many countries elected to bail out their banking systems using taxpayer money. Several countries received bailout packages from the troika European Commission, European Central Bank, International Monetary Fund , which also implemented a series of emergency measures. Many European countries embarked on austerity programs, reducing their budget deficits relative to GDP from to However, with the exception of Germany, each of these countries had public-debt-to-GDP ratios that increased i.
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This indicates that despite improving budget deficits, GDP growth was not sufficient to support a decline improvement in the debt-to-GDP ratio for these countries during this period. Eurostat reported that the debt to GDP ratio for the 17 Euro area countries together was France had no significant changes, while in Germany and Iceland the unemployment rate declined.
Unemployment varied significantly by country. Economist Martin Wolf analysed the relationship between cumulative GDP growth from and total reduction in budget deficits due to austerity policies see chart at right in several European countries during April He concluded that: "In all, there is no evidence here that large fiscal contractions [budget deficit reductions] bring benefits to confidence and growth that offset the direct effects of the contractions. They bring exactly what one would expect: small contractions bring recessions and big contractions bring depressions.
Economist Paul Krugman analysed the relationship between GDP and reduction in budget deficits for several European countries in April and concluded that austerity was slowing growth, similar to Martin Wolf. He also wrote: " No wonder, then, that the whole austerity enterprise is spiraling into disaster. Britain's decision to leave the European Union in has been partly attributed to the after-effects of the Great Recession on the country.
While India , Uzbekistan , China , and Iran experienced slowing growth, they did not enter recessions. South Korea narrowly avoided technical recession in the first quarter of Australia avoided a technical recession after experiencing only one quarter of negative growth in the fourth quarter of , with GDP returning to positive in the first quarter of The financial crisis did not affect developing countries to a great extent. Experts see several reasons: Africa was not affected because it is not fully integrated in the world market.
Latin America and Asia seemed better prepared, since they have experienced crises before. In Latin America, for example, banking laws and regulations are very stringent.
Bruno Wenn of the German DEG suggests that Western countries could learn from these countries when it comes to regulations of financial markets. The table below displays all national recessions appearing in for the 71 countries with available data , according to the common recession definition, saying that a recession occurred whenever seasonally adjusted real GDP contracts quarter on quarter, through minimum two consecutive quarters.
The few recessions appearing early in are commonly never associated to be part of the Great Recession, which is illustrated by the fact that only two countries Iceland and Jamaica were in recession in Q As of October , only five out of the 71 countries with available quarterly data Cyprus, Italy, Croatia, Belize and El Salvador , were still in ongoing recessions.
Iceland fell into an economic depression in following the collapse of its banking system see — Icelandic financial crisis. The following countries had a recession starting in the fourth quarter of United States, . The following countries had a recession already starting in the first quarter of Latvia,  Ireland,  New Zealand,  and Sweden.
South Korea miraculously avoided recession with GDP returning positive at a 0.
Of the seven largest economies in the world by GDP, only China avoided a recession in Japan was in recovery in the middle of the decade s but slipped back into recession and deflation in On February 26, , an Economic Intelligence Briefing was added to the daily intelligence briefings prepared for the President of the United States. This addition reflects the assessment of U. Business Week stated in March that global political instability is rising fast because of the global financial crisis and is creating new challenges that need managing.
If you're in a much longer-run downturn, then all bets are off. Political scientists have argued that the economic stasis triggered social churning that got expressed through protests on a variety of issues across the developing world.
In Brazil, disaffected youth rallied against a minor bus-fare hike;  in Turkey, they agitated against the conversion of a park to a mall  and in Israel, they protested against high rents in Tel Aviv. In all these cases, the ostensible immediate cause of the protest was amplified by the underlying social suffering induced by the great recession. In January , the government leaders of Iceland were forced to call elections two years early after the people of Iceland staged mass protests and clashed with the police because of the government's handling of the economy.
The rally gathered some 10—20 thousand people. In the evening the rally turned into a Riot. The crowd moved to the building of the parliament and attempted to force their way into it, but were repelled by the state's police. In late February many Greeks took part in a massive general strike because of the economic situation and they shut down schools, airports, and many other services in Greece.
In addition to various levels of unrest in Europe, Asian countries have also seen various degrees of protest. Beyond these initial protests, the protest movement has grown and continued in In late , the Occupy Wall Street protest took place in the United States, spawning several offshoots that came to be known as the Occupy movement. In the economic difficulties in Spain increased support for secession movements.
In Catalonia, support for the secession movement exceeded. On September 11, a pro-independence march drew a crowd that police estimated at 1. The financial phase of the crisis led to emergency interventions in many national financial systems. As the crisis developed into genuine recession in many major economies, economic stimulus meant to revive economic growth became the most common policy tool.
After having implemented rescue plans for the banking system, major developed and emerging countries announced plans to relieve their economies. In particular, economic stimulus plans were announced in China , the United States , and the European Union. The Federal Reserve, Treasury, and Securities and Exchange Commission took several steps on September 19, to intervene in the crisis.
The exceptions would expire on January 30, , unless extended by the Federal Reserve Board. The Securities and Exchange Commission announced termination of short-selling of financial stocks, as well as action against naked short selling , as part of its reaction to the mortgage crisis. On September 15, , China cut its interest rate for the first time since Indonesia reduced its overnight rate, at which commercial banks can borrow overnight funds from the central bank, by two percentage points to The stimulus package was invested in key areas such as housing, rural infrastructure, transportation, health and education, environment, industry, disaster rebuilding, income-building, tax cuts, and finance.
Later that month, China's export driven economy was starting to feel the impact of the economic slowdown in the United States and Europe despite the government already cutting key interest rates three times in less than two months in a bid to spur economic expansion.
On November 28, , the Ministry of Finance of the People's Republic of China and the State Administration of Taxation jointly announced a rise in export tax rebate rates on some labour-intensive goods. These additional tax rebates took place on December 1, The stimulus package was welcomed by world leaders and analysts as larger than expected and a sign that by boosting its own economy, China is helping to stabilise the global economy. News of the announcement of the stimulus package sent markets up across the world. However, Marc Faber claimed that he thought China was still in recession on January In Taiwan, the central bank on September 16, , said it would cut its required reserve ratios for the first time in eight years.
In developing and emerging economies, responses to the global crisis mainly consisted in low-rates monetary policy Asia and the Middle East mainly coupled with the depreciation of the currency against the dollar. There were also stimulus plans in some Asian countries, in the Middle East and in Argentina.
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Until September , European policy measures were limited to a small number of countries Spain and Italy. In both countries, the measures were dedicated to households tax rebates reform of the taxation system to support specific sectors such as housing. At the beginning of , the UK and Spain completed their initial plans, while Germany announced a new plan. The German government bailed out Hypo Real Estate. The plan comprises three parts. The second part will consist of the state government increasing the capital market within the banks. From , the United Kingdom began a fiscal consolidation program to reduce debt and deficit levels while at the same time stimulating economic recovery.
Most political responses to the economic and financial crisis has been taken, as seen above, by individual nations. Some coordination took place at the European level, but the need to cooperate at the global level has led leaders to activate the G major economies entity. A first summit dedicated to the crisis took place, at the Heads of state level in November G Washington summit.
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The G countries met in a summit held on November in Washington to address the economic crisis. Apart from proposals on international financial regulation, they pledged to take measures to support their economy and to coordinate them, and refused any resort to protectionism. Another G summit was held in London on April Finance ministers and central banks leaders of the G met in Horsham , England, on March to prepare the summit, and pledged to restore global growth as soon as possible.
They decided to coordinate their actions and to stimulate demand and employment.
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They also pledged to fight against all forms of protectionism and to maintain trade and foreign investments. They also committed to maintain the supply of credit by providing more liquidity and recapitalising the banking system, and to implement rapidly the stimulus plans. As for central bankers, they pledged to maintain low-rates policies as long as necessary. Finally, the leaders decided to help emerging and developing countries, through a strengthening of the IMF.
The IMF stated in September that the financial crisis would not end without a major decrease in unemployment as hundreds of millions of people were unemployed worldwide. The IMF urged governments to expand social safety nets and to generate job creation even as they are under pressure to cut spending. The IMF also encouraged governments to invest in skills training for the unemployed and even governments of countries, similar to that of Greece, with major debt risk to first focus on long-term economic recovery by creating jobs. The Bank of Israel was the first to raise interest rates after the global recession began.
On October 6, , Australia became the first G20 country to raise its main interest rate, with the Reserve Bank of Australia moving rates up from 3.
On November 2, the Bank of England raised interest rates for the first time since March from 0. On April 17, , the then head of the IMF Dominique Strauss-Kahn said that there was a chance that certain countries may not implement the proper policies to avoid feedback mechanisms that could eventually turn the recession into a depression. Such synchronized recessions were explained to last longer than typical economic downturns and have slower recoveries.
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Olivier Blanchard , IMF Chief Economist, stated that the percentage of workers laid off for long stints has been rising with each downturn for decades but the figures have surged this time. The last time that the wealth gap reached such skewed extremes was in — From Wikipedia, the free encyclopedia. For background on financial market events beginning in , see Financial crisis of — Not to be confused with the Great Depression during the s. Early 21st-century global economic decline.
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Main article: Causes of the Great Recession.