High levels of public debt among countries in the euro zone turned into a full-blown crisis for the currency block. As markets began to lose confidence in the ability of a few countries to finance their debt, and rapidly pushed up their borrowing costs, the European Union and the IMF eventually resolved to bail out Greece and, later, Ireland. Investors also fretted over Spain and Portugal. Measures to tackle budget deficits were met with protests, especially in Greece, which endured strikes and riots. In France 1m people demonstrated against pension reforms in a single day.
As Europe tightened its fiscal belt, America passed more stimulus measures. Barack Obama also signed into law the most sweeping changes to America’s financial-regulatory system since the 1930s and a health-care reform act that was hailed by many as America’s most significant piece of social legislation since the 1960s. Conservatives challenged the act in the courts.
Unease about deficits and the “jobless recovery” were factors behind the increasing clout of tea-partiers in America. With their support the Republicans scored a sensational win in a special election for Ted Kennedy’s former Senate seat in Massachusetts. November’s mid-term elections saw the Democrats swept from power in the House by the biggest swing to the Republicans in decades. Congress ended the year on its lowest-ever Gallup approval rating – 13%.
In China the main worry was of an overheating economy. The central bank unexpectedly raised interest rates for the first time in three years amid concerns about inflation. Official trade statistics showed China had overtaken Germany as the world’s biggest exporter. Tensions over currency policy were at the forefront during summits of the G20 and IMF.
Google had a spat with China over censorship and a cyber-attack on its website there, causing it to redirect its Chinese internet searches through Hong Kong. Separately,
Google, Facebook and others promised to do more to protect privacy after an outcry about their handling of users’ personal data.
The year of living dangerously
An earthquake in Haiti was a humanitarian disaster, killing at least 230,000 people and leaving 1m homeless. The quake devastated Port-au-Prince and left swathes of the country’s fragile infrastructure in ruins. A deadly outbreak of cholera later in the year and political unrest compounded the misery.
Drifting ash clouds emanating from a volcano in Iceland led to the closure of European air space for several days, causing the biggest disruption to worldwide air travel since September 11th 2001.
American combat operations ended in Iraq, seven years after the start of the war. Around 50,000 troops remain in a support role until the end of 2011. Iraq continued to be troubled by violence and suicide-bombs after the Americans departed. An election was held in March, though a new government didn’t begin to emerge until November.
The war in Afghanistan rumbled on. Coalition troops mounted their biggest offensive against the Taliban since 2001. The deaths of civilians in targeted missile attacks aimed at the Taliban and al-Qaeda caused rows. General Stanley McChrystal was sacked as commander of coalition forces after a magazine published an interview in which he disparaged the handling of the war by America’s civilian leadership. General David Petraeus took charge.
Pakistan endured another year of severe terrorist attacks, starting on January 1st when a suicide-bomber killed 100 people at a volleyball match.