Europe took the financial world on a stomach-churning ride in 2011.
The rising threat of default by heavily indebted European countries spread fear across financial markets and weighed on economies worldwide. As the year came to a close, banks and investors nervously watched Europe’s political and financial leaders scramble to prevent the 17-nation eurozone from breaking apart.
Several of the other biggest business stories of the year highlighted the way the global economy is linked:
• A British phone-hacking scandal shook the foundations of Rupert Murdoch’s U.S. media empire.
• A nuclear disaster in Japan stymied auto plants in the United States and beyond.
• The price of gasoline surged because of unrest in the Middle East and growing demand in Asia and Latin America.
In the United States, political squabbling led to the first credit downgrade for government debt, the economy suffered its fourth straight disappointing year and Apple founder Steve Jobs died.
The European financial crisis was chosen as the top business story of the year by business editors at the Associated Press. The sluggish U.S. economy came in second, followed by the death of Jobs.
1. European financial crisis.
The government-debt crunch rattled Europe’s financial system and weighed on the global economy. Portugal became the third European country, after Greece and Ireland the year before, to require a bailout as its borrowing costs soared. Investors worried that countries with much larger debts, such as Spain and Italy, would also need help.
Financial markets were volatile all year as hopes rose and then were dashed that forceful steps would be taken to prevent the financial crisis from becoming Europe’s version of the 2008 collapse of Lehman Brothers, which triggered a global financial panic and deepened the Great Recession. Banks worried that they or their partners wouldn’t be able to cover losses if governments defaulted, so they cut back on lending. European governments, facing ever higher borrowing costs, reined in spending — a policy response that is expected to stunt much-needed economic growth. Analysts estimate the slowdown in Europe, America’s No. 1 trading partner, will cut U.S. economic growth next year.
2. Bad U.S. economy: Year Four
The Great Recession officially ended in June 2009, analysts said, but the economic recovery continued to disappoint. For the first six months of the year, the economy grew at an annual rate of just 0.9 percent. Growth improved to a 2 percent rate in the third quarter and a 3 percent growth rate is forecast for the fourth quarter. Still, 2› years after economists say the recession ended, 25 million people remain unemployed or unable to find full-time work. The unemployment rate fell from 9 percent in October to 8.6 percent in November, providing a hopeful sign. Yet the housing market remained burdened by foreclosures and falling prices in many metropolitan areas.
3. Steve Jobs dies.
The college dropout who helped popularize the personal computer and created the iPod, iPhone and iPad, died Oct. 5. That was two months after Apple Inc., which Jobs started in a Silicon Valley garage in 1976, briefly surpassed Exxon Mobil Corp. as the most valuable publicly traded company in the world.
4. U.S. credit downgrade.
The inability of political leaders to come up with a long-term plan to reduce the federal budget deficit led the credit rating agency Standard & Poor’s to take away Uncle Sam’s sterling AAA rating for the first time.
5. Rupert Murdoch and the hacking scandal.
A British tabloid newspaper owned by Murdoch’s News Corp., which also owns Fox News and the Wall Street Journal, hacked the phone of a murdered schoolgirl. Murdoch was not charged with a crime, but an investigation by British authorities raised questions about Murdoch’s ability to run his worldwide media empire.
6. Japanese earthquake.
An earthquake and tsunami in March that crippled the Fukushima Dai-ichi nuclear reactor, owned by Tokyo Electric Power Co., cut off supplies of crucial Japanese parts and idled factories thousands of miles away. Auto companies, especially Toyota and Honda, were hit hardest.
7. Gasoline prices hit annual record.
The retail price of gasoline averaged $3.53 per gallon for the year, eclipsing the 2008 record of $3.24 per gallon.
8. Social media IPOs soars.
Social networking site LinkedIn’s shares more than doubled when it went public in May. LinkedIn was followed by large IPOs from online radio company Pandora Media, online discount site Groupon and social gaming site Zynga.
9. Occupy Wall Street.
On Sept. 17, several hundred protesters gathered at a small plaza about a block from the New York Stock Exchange. They slept in tents, ate donated meals and protested income inequality and the influence of money in politics.
10. Downfall of MF Global and Jon Corzine
The former governor, senator and co-chairman of Goldman Sachs lost control of a small brokerage firm he agreed to run in 2010.
