viernes. 29.09.2023

Dear Readers,

As you may have read in last week's Report, Per is retiring from his duties in the New Year as (I am sure you will agree with me) one of Spain's leading observers and commentators. I shall be taking over from him and providing you with a weekly report on the finance, the economy, the housing, the opportunities and the pitfalls of life in Spain, together with some news items, press cuttings and translations of stories of interest.

Helping me in this daunting task, I am lucky to have Andrew Brociner. Andrew is an economist who divides his time between Spain and Italy. He speaks five languages and will help guide us through both European and Spanish business. I have also asked Chuck Svoboda from the AUN to comment on political and housing affairs. Above all, Per will continue to supply me with his insight and his articles.

I have lived in Spain since I was just thirteen, some 45 years ago. I started The Entertainer newspaper, the first independent English-language free newspaper in Spain, back in 1985; which ran, under my editorship, until 1999. Since then, I have edited three other titles, including El Indálico (monthly, 2002 – 2009) in Spanish. I also run several 'blogs' including the popular site 'The Entertainer Online' at

I have both known and worked with Per since the early nineties, sharing with him the founding of Ciudadanos Europeos and the chance to work towards the vote for European Citizens in local municipal elections.

I hope that you will continue to subscribe to the newsletter, which will eventually have a new title and some simple lay-out, along with a free-to-use support web-page.

Lenox Napier

Higher prices electricity in Spain

The electricity costs in Spain are among the most expensive in the EU, and was one of three countries where costs increased the most during 2020-2011. The European Commission has asked Spain to change their tariffs to, ‘take into consideration the obligation to provide a universal service and effectively protect their most vulnerable consumers.’

For the non-resident property owner, the high standing charges in their electricity bills seems very unfair, as they have to pay for something not being used.

Less protection of the coasts

The government of Mariano Rajoy is reducing the level for coastal protection. In 2011,123 million euros were assigned for this purpose. In the 2013 budget, only 48.7 million has been allocated; a reduction of 60%.

Moreover, the Government is extending the concessions, for dwellings built in the beach zone, for up to 75 years, from the present 30 + 30, and has permitted the ‘chiringuitos’ (beach shack bars) to remain open for a further 4 years.

Residents must report assets abroad

As from the first quarter of 2013 foreign residents in Spain must, in the same manner as the Spanish, report to the Spanish tax authorities all their assets abroad, meaning basically in their home country. On the declaration form, in preparation, taxpayers must declare all accounts in foreign banks, properties and property rights, insurances and all other assets with a value of more than 50,000 euros.

Fewer but older inhabitants

The National Institute of Statistic reveals that by 2052 Spain, will have lost a tenth of its population and that 37% will be over 65 years. Today the elderly represent 17%.

At present Spain has 46.1 million inhabitants but will decline to 41,2 million by 2052. I wonder: Who will be paying my pension in 2052 or should I say, my son’s?

Emigration to Germany increases 53%

In the first half of this year immigration to Germany increased by 53%, compared with a year ago. Next to the Polish, Spaniards make up Germany’s largest group of emigrant workers.

Between January and September, 420,150 left Spain, 54,912 of them Spaniards, the remainder, those who came to Spain for work during the years of the property bubble.

Less ‘Cava’

With the New Year celebrations approaching, the Catalan wineries are busy selling their ‘champagne’ called ‘Cava’. In 2011, 87.3 million bottles were sold in Spain and 152,25 million exported. However, this year the sales representatives of the ‘Cava’ wineries are have difficulty finding clients in Spain. This is partly due to the animosity towards the Catalans who are contemplating independence, but also because other regions are now producing their own ‘Cava’.

Extremadura produce the popular Amendralejo, in Cordoba the brand Burnarj based on oranges, Huelva has Raigal and Granada the Barranco Orcuro. In Castilla y Leon there are 30 bodegas producing ‘Cavas’ and in the Valencia Region they will be toasting with Utiel Requena‘.

Limit of 2,500 euros for cash payments

Regulations forbidding businesses making cash payments to other business of more than 2,500 euros take effect this week. Those breaking the new law will be fined 25% of the sum involved. Transactions between businesses and private non-resident individuals are also now restricted 15.000 euros, and the transaction receipts must be kept for 5 years.

Residence Permit for buying property

The Government is considering giving Residence Permits to foreigners who buy a dwelling costing more than 160,000 euros. Prime Minister Rajoy’s comment on this bizarre proposal was, ‘We need to sell those dwellings!’

In our opinion, taking into consideration all the problems of being a foreign resident in Spain, the proposal is more of a threat than an advantage. It will have no effect on the decisions of citizens or Northern Europe, but may be to the benefit of ‘shadowy tax evaders and tricksters’ from outside Europe.

The crisis of the week:

Investment in commercial property was down 68% during the three first quarters of this year

The Parliamentary Commission on Taxes is discussing a ‘property amnesty’ for those who have not registered a new property or addition to an existing one in the Catastro (the Property Registry). The culprits will have to pay 60 euros, plus taxes

The Social Security System lost 26,961 foreign contributors in October, 1.5% of the total. Over the past year 83,487 foreign contributors have left

From this week everyone all civil cases taken before a court will have to pay charges from 100 to 1.200 euros

The Government has placed 4,937 million euros worth of bonds over 12 and 18 months, at the same high interest rate as the previous one. The country risk stands at 450 points

The Governor of the National Bank of Belgium and a Member of the Board of the European Central Bank, Luc Coene, said Spain should ‘urgently’ apply for a Rescue, to avoid the positive effect of the decision of the ECB to intervene in the markets, being lost

Governor of the Bank of Spain has declared that ‘no improvements in the economy can be detected’ and that the ‘economic situation is much adverse’

A study by the German Economic Institute ‘Ifo’ reveals, in interviews with 270 international experts and business leaders, that the economic situation in the Euro Zone will deteriorate significantly over the coming 6 months, with regard to budget deficits, unemployment and falls in consumption;

According to the Bank of Spain in September the percentage of bad loans in Spanish banks increased, hitting a new record of 10.7%,

At the beginning of this week , the Finance Ministers of the Euro Group, meeting with the IMF, failed for the second time to find a solution to the Greek debt problem, acknowledged by a disillusioned resident of the Group, Jean-Claude Juncker of Luxembourg.

Golf urbanisations – a time bomb

By Per Svensson

During the property boom, many building projects found buyers by including a golf course (or two) in the plans, in which the buyers of a property would have part ownership – but also a part responsibility for the costs of maintaining the expensive installation, with a high water demand. The Administration of the courses were in some cases taken over by the Community of Owners, in others with a mercantile society. In either cases ‘the can’ was left with the owners of the dwellings.

Some bought due to a genuine interest in golf playing. They are now swinging their clubs at a higher cost on ‘their course’ than they have to pay at another course, where they just have to ‘pay when they play.’ Others bought a dwelling as an investment, being assured of substantial letting income from the dwelling ‘with a view of the golf course’. Due to the high number of golf courses along the Mediterranean coast and the Islands, they have a hole in their pocket: The property taxes in Spain and the contributions to the Community of Owners for administrating and maintaining the common elements on the urbanisation, in many cases including the golf course.

More and more owners have stopped paying their yearly Community fees, leading to the urbanisations decaying and the golf courses drying out.

The water

Many urbanisations were built without a guarantee of water supply, only with a vague promise from the local authorities that the water, both for the dwellings and the golf course, was assured. Due to the enormous number of dwellings erected and golf courses planned or installed, and due to the Administrations becoming better controlled by the European Commission when it comes to water use, the promises of water are drying up.

The environment organisation World Wildlife Fund has calculated that an 18-hole golf course in dry Spain each year requires 700,000 m3 water – 20 times more than a course in northern Europe. That amount of water is enough to supply a town of 15,000 inhabitants. Thus, the more than 320 golf courses in Spain waste as much water as required by a mega city of 5 million inhabitants!

Example Cyprus

After a severe period of drought, with a reduction by 20% in the rainfalls and higher temperatures, the Cypriot Government is considering cancelling authorisation for 14 new golf courses.

In 2008, the level in the water reservoirs sank to below 5% and the island had to be supplied by tankers from Greece.

Cyprus has asked the European Union for a financial rescue package.

Do not buy a problem

Some of the dwellings now being peddled at reduced prices to uninformed foreigners are being sold with a participation in a golf course (finished or to be finished). In spite of loud declarations and assurances from the promoters of the ‘Road Shows’ being held outside Spain, some with the support of the Spanish Ministry of Foreign Affairs, that the legal safety of the properties promoted are guaranteed, we shall see new buyers landed with the same problems as the present owners.

Mr. Margallo, the Spanish Foreign Minister, previously a member of the European Parliament, did his best to belittle the problems and abuses committed against the foreign property buyers in Spain when he voted against the Auken Report (which was approved by an overwhelming majority in the European Parliament). Our recommendation to potential property buyers in Spain is, ‘Do not buy from Mr. Margallo!’

If you are already an owner of a dwelling on a golf urbanisation, where the greens are turning brown or the costs spiralling, I can only offer my condolences. Maybe you could try selling it to Mr Margallo?!

Swiss bank accounts, Catalan regional elections

Catalonia is holding elections to the regional parliament on 25th of this month which the leaders of the regionalist party CiU are trying to make into a plebiscite on independence from Spain.

To the great dissatisfaction of the CiU leaders, the questions of corruption, tax evasion and transfer of huge sums of money to accounts in Swiss banks have been brought to attention in information leaked from the Swiss UBS bank, and in a Spanish police report published by the leading newspaper ‘El Mundo’.

Last week we wrote about the father of the present President of the Catalan government, Artur Mas, who had an substantial account in Switzerland. He is being investigated for possible corruption connected with the construction of the Palau in Barcelona. This week we can tell our readers about the publication in ‘El Mundo’ of a report from the Spanish police that the Pujol family has 131 million euros stashed away in a Swiss account. Jordi Pujol was one of the founders or the regional party and President of the Generalitat for several years. He was also the founder of the Banca Catalana that was investigated by the Bank of Spain due to heavy losses. The national prosecutors examined transfers to other countries of more than 500 million pesetas, but in 1986 the Barcelona courts of shelved the accusations.

The Catalan nationalists are now pretending that the accusations about the Swiss bank accounts are just election rhetoric.

In the meantime, President Barroso of the European Commission has confirmed that is a territory segregates from a member state it automatically leaves the European Union, and their citizens will no longer be European Citizens.

Don't Change the Rules, Say the Banks

Lenox Napier

While the banks and the Government are worried (perhaps for different reasons) by a recent spate of suicides following the increase in eviction orders from unpaid mortgages (proceedings start after just two unpaid months and, following most bank small-print rules, the property will be returned to the lender without any alleviation of the debt incurred by the mortgagee), new rules to protect citizens have grudgingly been proposed 'in extreme cases' by the banks, to be followed shortly – perhaps – by new legislation from the Government. The banks would appear to be against this liberalisation....

The Spanish Banking Association (AEB) considers that it would be 'harmful' to undertake 'draft reforms' in the mortgage law as a way to fight against evictions, since it might 'break the legal security' for the creditors and could raise the costs and limit the opportunity for being granted credit to buy a house, says El Huffington Post in its Spanish version.

In a letter sent to the banks, the Chairman of the AEB, Miguel Martin, underlines that 'it would be highly prejudicial' to allow 'significant' reforms in the rules and regulations governing evictions, 'inspired by short-term needs', because that could 'break the security under law - both for creditors and for investors'.

'In particular', continues the letter, 'the mortgage business could be affected, as it would significantly effect access to housing, by raising costs to the customer and limiting credit'.

He goes on: 'the current economic crisis is creating difficulties for paying one's mortgage in a significant number of households', however, he says, 'almost 97% of Spanish families with mortgages are facing their payment obligations'.

But, Spanish banking practices are coming under fire from the public. Howsoever, the AEB believes that 'the indiscriminate criticism of the financial sector, accusing it of unfair and irregular practices and lack of social sensitivity, can only contributes to generate an excessive social alarm'. How true.

Reactions to my Goodbye

I have received many reactions to my decision to stop writing the Weekly Reports from the end of this year. Here are some of them:

Dear Per Svensson

Thanks for another newsletter

I am sorry to hear you will terminate the writing – I have been a very satisfied reader for many years

I hope Lenox Napler will continue in the same way

Thanks again – very much

Kind regards

Harald O. Osvol

Dear Per,

I'd just like to express my appreciation and that of my wife, Anke, for your work on our behalf. Your weekly reports have been lively, penetrating, and informative. And they are clearly the result of devotion and hard work. I'm sorry we have never met, but it's never too late. Chuck has always spoken highly of you. Understandably.

Our best regards,

Douglass and Anke Carver

Moraira homeowners for 40 years

Congratulations Per,

You can now move into retirement with the satisfaction of a job well done !

I don't remember whether I've been receiving your infos for 10 years, 15 years or longer , but they have always proved interesting and enlightening reading. Unfortunately, the last few years' issues have been thoroughly and consistently depressing. But I don't criticise you for that ........... its nice for once to have someone with the balls to tell it how it is !

Put your feet up, get the pipe & slippers out, pour yourself a large (Spanish) brandy and reflect warmly on the fact that you got out before the rot set

Happy days, and many thanks.

Geoff Hayward

Washington Post:

Protests and labour unrest sweep across Europe

But the protests seemed unlikely to disrupt what has become an almost unstoppable trend: grinding austerity in struggling southern European countries and limited prospects for the future. In Spain, many industrial workers were on strike. Italian unionists clashed with police. Transportation was hard-hit in Portugal. In some countries, electricity consumption dropped noticeably as factories were idled.

In Greece, the worst-off of the 17 nations that share the euro currency, there is uncertainty about the future funding of the government’s crushing debt, even as more than a quarter of workers are unemployed. That uncertainty has mixed with fury that, although the country approved even more austerity measures last week, Greece is being made to scramble to raise $6.4 billion to make a debt payment to the European Central Bank this week. Politicians had expected a new installment of bailout money to come immediately after the vote.

“The money we take from Europe, from the IMF, it doesn’t go into the country; it doesn’t go to start growth. It just goes to pay debts,” said Evangelos Rokos, 39, a laboratory worker at the National Technical University of Athens who walked off his job Wednesday. He was marching down a once-elegant main artery of central Athens whose shops, one by one, have shuttered.

European leaders indicated this week that they are likely to give Greece a $40 billion tranche of its bailout by the end of the month — forestalling bankruptcy and giving the country a bit of breathing room — along with an extra two years to implement painful spending cuts and open up labor markets in an attempt to bring back economic growth. But approval for the payment has been delayed, in effect, by arguments over just how grim Greece’s fiscal picture is.

The International Monetary Fund has been saying that because Greece’s debt and future growth prospects are so bad, European governments and the European Central Bank will have to write off part of the bailout money they have sent if the country is to have any hope of getting back on track. European leaders, mindful of how unpopular that might be at home, have sounded more optimistic. They say that if they simply give Greece a bit more time to meet its targets, the country will return to sustainability.

The dispute broke into the open earlier this week at a news conference where IMF Managing Director Christine Lagarde rolled her eyes at the more optimistic proposals of Luxembourg Prime Minister Jean-Claude Juncker, who leads the group of euro-zone countries.

At a conference Wednesday in Malaysia, Lagarde said that “obviously from the IMF’s perspective, we expect a real fix, not a quick fix, and that means clearly debt that is sustainable as quickly as possible,” Reuters reported. The IMF also has been pushing for the pace of austerity measures to slow in the hardest-hit countries, saying that some steps have been doing more harm than good.

With economies slowing down across Europe, even rich countries may soon start feeling the pinch, making big write-offs for the struggling periphery even more politically unpopular. Germany’s central bank on Wednesday released an annual report on the country’s financial stability indicating that such fears are not going away.

“Risks for the German financial system have not diminished in 2012 compared to the previous year,” the report said. “The European sovereign debt crisis has even grown more acute at times.”

In Greece, the austerity measures that squeaked through Parliament last week will clamp down further on some of the most vulnerable parts of the population. A retiree with a monthly pension of $1,270 will lose 5 percent of it, for example.

And the delay in sending new money to keep Greece from bankruptcy has further hit an already divided country.

“The only thing that will collapse is what remains of your credibility,” Alexis Tsipras, the leader of the leftist opposition Syriza party, said last week in Parliament before the budget vote, urging a rejection of the austerity measures and the bailout.

According to opinion polls, Syriza is now the most popular political party in Greece.

EU proposes easing Spain austerity cuts as protests rage

James G. Neuger, Bloomberg News

Europe’s budget enforcers proposed easing the pressure on Spain to cut its deficit, backing further away from the austerity-first mantra that has dominated the response to the sovereign-debt crisis.

As a general strike against austerity hobbled Spain’s industry and transport system, the European Commission said Spain doesn’t need to compound the budget-cutting pain through the end of 2013 and indicated the country would be eligible for a credit line to shore up its public balance sheet.

“Spain has taken effective action in restoring the sustainability of public finances — the box is ticked, as long as the implementation is solid and convincing,” EU Economic and Monetary Affairs Commissioner Olli Rehn told reporters in Brussels Wednesday. Asked whether Spain meets conditions for aid, he said: “Spain is on track as regards taking policies that will help restore its competitiveness and health of public finances.”

Wednesday’s announcement follows concessions to Greece, Portugal and earlier leniency granted to Spain itself, in a further shift away from the fiscal retrenchment that critics say has spread recession across southern Europe and exacerbated the fiscal crisis.

The commission’s endorsement failed to lift Spanish markets. Bonds fell, pushing the 10-year yield up by 9 basis points to 5.94% as of 6:15 p.m. The extra yield over German levels widened by 8 basis points to 459 basis points. The IBEX 35 stock index slid 0.3%

IMF suggests Europe must do more for Greek debt

WASHINGTON | Thu Nov 15, 2012 10:33am EST

Nov 15 (Reuters) - The International Monetary Fund has done what it can to help Greece reach debt sustainability, a Fund spokesman said, leaving the window open for further action by the indebted country's European lenders.

"The IMF has done what it needs to do in the context of its framework," IMF spokesman William Murray told reporters on Thursday. "Clearly there has to be other actions taken to reach debt sustainability."

When asked whether that meant Greece's European lenders would need to do more, Murray said that is "presumably" who it meant. He declined to elaborate on what actions are needed.

The IMF also reiterated calls for the United States to act swiftly in resolving its 'fiscal cliff': $600 billion worth of automatic spending cuts and tax hikes that will kick in early next year unless the U.S. Congress can reach a deal.

Without a deal, the United States is likely to slip into recession, pulling the global economy down with it, Murray said.

How Austerity Plans Failed the European Union

By Julio Godoy

BERLIN, Nov 16 2012 (IPS) - The austerity programmes being rolled out in virtually every member state of the European Union (EU) – particularly in Greece, Portugal, Spain and Italy – have failed to reach their stated objective of consolidating public finances in order to solve sovereign debt crises.

Instead, these programmes – which entail massive public spending cuts in sectors such as education, health and governance – are “leading to collective folly” and even to “a social breakdown” across the continent, according to numerous economic experts.

Far from solving the debt crisis, as promised, the current fiscal consolidation plans will result in higher debt-GDP ratios in the EU in 2013, according to recent research.

Several reports have now confirmed what economists and activists warned months and even years ago: that the economic crisis, triggered by the financial collapse of 2007-2008 and the subsequent state-sponsored bailout of banks and investment funds, has resulted in higher unemployment and poverty rates in every country.

According to figures published by the official European statistics office, Eurostat, youth unemployment in Greece, Ireland, Italy, Portugal and Spain is presently above 30 percent.

The situation is particularly difficult in Greece, where youth unemployment has more than doubled since 2008, to reach 55.4 percent in 2012. In Spain, where a 37 percent youth unemployment rate was the norm in 2008, the crisis has rendered over 50 percent of the youth labour force jobless.

Further deterioration of the social climate in Greece, where unions have orchestrated a wave of general strikes against yet another bout of state budget cuts, this time worth 17 billion dollars, augurs ill for the future of the Union under the shadow of austerity.

In its newest Global Prospects Report, released on Nov. 5, the London-based Centre for Economic and Business Research (CEBR) predicts that the Eurozone recession will continue through 2013, with only “marginal growth … likely” in 2014.

According to the CEBR, the outlook is particularly calamitous in Greece, Italy, and Spain, with negative economic growth prospects. The report forecasts contractions of gross domestic product (GDP) in all three countries for 2013, of seven, 1.8, and 2.2 percent respectively.

“The economic situation in some parts of Europe is moving from bad to catastrophic,” Douglas McWilliams, chief executive of CEBR and a co‐author of the report, told IPS. “There is a danger that the economic problems will spill over into social breakdown in many areas of Europe as unemployment soars and governments run out of money.”

Yet another analysis of the economic and social situation in Europe, released Nov. 1 and authored by two leading economists at the London-based National Institute of Economic and Social Research (NIESR), goes even further, arguing that the austerity programmes across the continent are “self-defeating”.

The NIESR’s most benign scenario for 2013 forecasts a worsening of the present depression. According to their calculations, the austerity programmes will have a negative impact on the debt-growth ratios of 8.9 percent in Greece, 7.7 percent in Portugal, 4.2 percent in Spain, and 1.9 percent in Italy.

Jonathan Portes, co-author of the study, told IPS that his analysis of the present fiscal policies in Europe leads to the conclusion that “while in ‘normal times’, fiscal consolidation would lead to a fall in debt-GDP ratios, in current circumstances…fiscal consolidation is indeed likely to be ‘self-defeating’ for the EU collectively.”

In a study released late October, the European Foundation for the Improvement of Living and Working Conditions (Eurofound), an autonomous body of the EU, emphasised, “The immediate future of Europe depends upon the 94 million Europeans aged between 15 and 29.”

According to the study, the youth unemployment rate was 33.6 percent (or 19.5 million people) in 2011, “the lowest level ever recorded in the history of the European Union”.

However, there is huge variation between EU member states, with rates varying from below 7 percent in Luxembourg and the Netherlands, to above 17 percent in Bulgaria, Ireland, Italy, and Spain.

“The consequences of a lost generation are not merely economic,” the Eurofound report warns, “but are societal, with the risk of young people opting out of democratic participation in society.”

The drain of an unproductive youth force – in terms of lost output – amounts to some 153 billion euros annually, or 1.2 percent of the EU’s GDP, according to the Eurofound report.

Stefano Scarpetta, deputy director for Employment, Labour and Social Affairs at the Organisation for Economic Co-operation and Development (OECD), charged that Europe was “failing in its social contract” with the young, and warned that political disenchantment could reach levels similar to those that sparked the North African uprisings that have been dubbed the Arab Spring.

According to a report released last May by the International Labour Organisation (ILO), unemployment among young people in North Africa jumped five percentage points in 2011, to 27.9 percent.

“North Africa and the Middle East stand out in terms of their overall unemployment problem and these are the only two regions where the unemployment rate exceeded 10 percent in 2011 for the population aged 15 and above,” according to the ILO.

That situation is now true in various EU member states, where discontent has emerged in the form of ‘indignados’ in Spain and mass youth mobilisations in Portugal, Greece, and elsewhere in Southern Europe.

Peter Matjasic, president of the European Youth Forum, the representative body of more than 90 national youth councils and international youth NGOs, urged the EU to make the European “vision (of a social democratic society) a reality for a generation.”

Matjasic also demanded that expectations raised by the bestowal of the Nobel Peace Prize upon the EU this year be fulfilled. “The Nobel committee (talked) of the success of the ‘European dream’ and European leaders this week spoke about strengthening it. But without investing in youth now, it is in danger of becoming a lost dream”.

As eurozone economy shrinks, govt debt loads grow

By DAVID McHUGH, AP Business Writer

FRANKFURT, Germany (AP) — Europe's government-debt crisis is no longer panicking financial markets. But it won't end until the region's economy starts growing strongly again.

And that will be a while.

The economy of the 17 countries that use the euro has shrunk for two straight quarters — a common definition of a recession — and analysts forecast little or no growth until 2014.

Without growth, there won't be enough tax revenue to help countries like Greece, Italy, Spain and Portugal narrow their deficits and slow the expansion of their debts. Their debt burdens as a percentage of economic output, a key measure of fiscal health, look worse by the day.

The eurozone's combined debts are equal to about 93 percent of the region's gross domestic product this year and that figure is forecast to rise to peak at 94.5 percent next year. In 2009, the eurozone's debt-to-GDP ratio was 80 percent. A ratio above 90 percent is generally considered high and can put pressure on governments' borrowing costs.

"The worrying thing about the projections is, the peak seems to keep moving," says Raoul Ruparel of the Open Europe think tank.

The panic in European financial markets has eased in recent months largely because of aggressive action by the European Central Bank. The ECB said on Sept. 6 that it was willing to buy unlimited amounts of government bonds issued by countries struggling to pay their debts. That pledge quickly lowered borrowing costs for Spain and Italy, which earlier in the year faced the same kind of financial pressure that forced Ireland, Greece and Spain to seek bailouts.

But stemming the crisis and heading off a default by one or more countries aren't the same as stimulating growth. The U.S. economy remains weak several years after actions by the Federal Reserve helped arrest its financial crisis.

Europe's economy is being held back for several reasons:

— Austerity. Whether they got into trouble by overspending or after rescuing banks from a real-estate collapse, European governments are tackling their debts the same way: By raising taxes and cutting spending, including wage cuts for public sector workers. Italy slashed its deficit by 2.8 percent of GDP this year, but economists estimate that reduced growth by 1.5 percentage points. Less spending by the government and less spending by consumers who gave more of their income to the government were a drag on the Italian economy.

— Shaky banks. Banks reeling from the financial crisis are making it harder and more expensive for businesses in the hardest-hit countries to borrow. That's crimping investment and hiring by these companies across southern Europe. Companies in Greece or Portugal are often paying twice as much interest on loans as their German competitors.

— Consumers are holding back. Wage cuts have weighed on family budgets, and people are saving more because they're worried about further economic shocks. Together, these trends have reduced consumer spending by about 1 percent this year.

— Anti-business regulation. Laws in many European countries make it hard for companies to lay workers off in lean times, and that makes employers reluctant to hire. Bureaucracy chokes the process of starting a business or exporting goods. Greece's tax accounting rules were so onerous — permitting large penalties for minor paperwork errors — that the EU demanded the entire rulebook simply be abolished. Parliament finally complied last week.

European governments are slowly trying to make their economies more competitive. But in a September survey on global competitiveness by the World Economic Forum, Greece, Portugal, Spain and Italy ranked low because of poor access to financing and rigid labor markets.

It requires 11 bureaucratic filings to start a business in Italy. Fellow euro member Slovenia requires two.

Eurostat data released Thursday showed that for the second straight quarter the eurozone economy contracted. Output shrank by 0.1 percent in the July-September quarter, compared with the previous quarter.

The European Union's executive commission forecasts the eurozone economy will shrink 0.4 percent for all of 2012 and grow by just 0.1 percent in 2013.

Without growth, there's little chance of cutting into an 11.6 percent jobless rate, the highest since the euro was introduced in 1999. Unemployment tops 25 percent in Greece and Spain.

Even with a modest recovery in late 2013 and 2014, the eurozone economy will be smaller — adjusted for inflation — than it was in 2008, when the Great Recession reverberated around the world.

Marco Valli, chief European economist for Unicredit, has charted recoveries from five crises going back to the late 1970s. He forecasts that the eurozone economy will not recover to its 2008 level until the first six months of 2015.

"This is unusual, in that even during the major financial crisis of the past, we have never seen such a slow recovery from a financial crisis," he says.

Weekly Report of Lennox Napier