Here’s an illustration:
California is a State with 37 million people living in it. California has a “gross domestic product” of approximately $1.85 trillion. Right now, California is in acute economic crisis as the government tries to bridge a $26 billion budget deficit – in short, if we were to bail out California, it would cost us $26 billion dollars.
Portugal is a nation with 10.6 million people living it it – somewhat less than one third of California’s population. Portugal’s GDP is about $235 billion, a figure equal to around 13% of California’s GDP. Portugal is also involved in an acute economic crisis…but their shortfall is about $99 billion.
This is just one small nation in the Eurozone – not all that important an economic player by any stretch of the imagination and just to keep it afloat will cost Europe $99 billion. And that is just to keep the wolf from the door – the money will still have to be paid back by Portugal some how. And the problems of Spain and Italy dwarf those of Portugal by many times over.
The European Union and the European central bank say they can keep all this going…that they’ve got the plan to fix it all. So, no worries.
Exit question: do you believe them?
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