Iceland, $4.6 billion
Iceland was the first European country to fall in the global financial crisis. When three Icelandic banks collapsed in 2008, the government had few options other than to also become the first European country to receive a bailout. The IMF loaned it $2.1 billion and neighboring Scandinavian countries – Denmark, Finland, Norway, and Sweden – provided another $2.5 billion.
Before the collapse, Iceland had been the world’s fourth richest nation. It was declared one of the best countries in the world to live in, according to the United Nations. But deregulation of the financial system allowed risk-taking with little government oversight. Then its banks collapsed and were nationalized and its currency rapidly lost value.
Like many European countries, Iceland is now operating under a strict austerity budget and is struggling to foster growth while also cutting costs and restore financial trust – in 2010, its loans were temporarily frozen when it refused to repay the British and Dutch governments for money those nations' citizens lost in Iceland's banking collapse.
Greece, $142 billion
Greece, long considered the “Achilles heel” of the eurozone, was the first eurozone member (ever) to receive a bailout specifically from the European Union (Iceland was bailed out by the IMF). When the prospect of a bailout was first discussed, its budget deficit – $419 billion, or 12.7 percent of its total budget – was four times the limit permitted for eurozone countries, and concern over its financial health was dragging down the value of the euro. EU leaders were divided over whether to bail out Greece or wait and see if the nation's own spending cuts and financial reforms were able to chip away at the deficit.
In the end, Greece received a $142 billion bailout in May 2010, with about $80 billion of that coming from the eurozone members. The rest came from the IMF. The bailout came with instructions to implement serious austerity measures.
Greece’s debt crisis raised concern about three other European countries with lagging economies: Portugal, Ireland, and Spain. The EU created a $955 billion rescue fund, although the hope was that stringent financial measures that came along as a condition of the bailout would encourage governments to shape up before a financial rescue became necessary.
Ireland, $113 billion
After Greece came Ireland, which received a $113 billion loan from the European Union in December 2010 after months of Irish officials insisting that a bailout was not necessary. Hand-in-hand with the bailout – targeted at propping up several Irish banks that had engaged in risky lending and ended up holding $90 billion in bad loans – came what many said was the country’s harshest budget ever. It included $8 billion in spending cuts.
EU officials struggled to decide what would be worse: not bailing out Ireland and perhaps undermining the financial stability of other European governments and large banks holding Ireland’s debt, or bailing out the investors who created the bad debt with their cash. The latter, EU officials worried, would encourage risky financial behavior in the future. In the end, the desire to prevent the crisis from spreading won out.
Portugal, $122 billion
The Portuguese prime minister announced on April 6 that he would seek a bailout, becoming the third of the PIGS countries (Portugal, Ireland, Greece, and Spain) to do so. He is expected to formalize his request today. According to Reuters, Portugal's bailout will total $122 billion.
Portugal has been trying for some time to implement austerity measures strict enough to chip away at the country’s deficit-to-GDP ratio and avoid a bailout. The goal is to bring the deficit down from 7.3 percent in 2010 to 4.6 percent this year. Efforts to implement austerity measures led to a government collapse in late March, making it less likely the country can work its way out of its deficit via spending cuts.
The bailout is expected to come with austerity conditions similar to those requested of Greece and Ireland.
Spain, $600 billion?
With Portugal now negotiating the terms of its bailout, the eurozone now seems to be waiting for the last shoe to drop in Spain, Europe’s fourth largest economy. In mid-March, Moody’s downgraded Spain’s debt rating (which measures its ability to pay back its debt), indicating that it had doubts about the country’s ability to stave off a default.
Spain insists that although its economic growth is slow, it will not need a bailout, partially because of significant spending cuts and other financial reforms. Similar things were said by Ireland and Portugal before they finally agreed to bailouts. According to Capital Economics, the price tag for a Spain bailout would likely order on €420 billion ($600).