Fears of a second so called double dip recession are emerging. The rate at which banks lend and borrow to each other has started to rise for the first time in months as everyone starts to get concerned about each others’ exposures to Greece, Portugal, Italy, Ireland, the UK and Spain.

An already weakening recovery could stall completely as credit once again dries up. It was the seizing up of credit around sub-prime mortgages which led to the 2008/2009 global recession – the deepest since the 1930s depression.

It is the countries with weakest economies which were dependent on property and financial speculation which are hardest hit and at most risk. The table below ranks the countries by the likelihood of going bankrupt.

Country Debt as % of Economy Deficit as % of economy
Greece 115% 13.6%
Portugal 76.8% 9.4%
Ireland 64% 52.2%
Spain 52.2% 11.2%
Italy 115.8% 5.3%
United Kingdom 68.1% 11.5%

If these countries start defaulting on their sub-prime sovereign debt then banks will suffer losses in a similar way as they did with sub-prime mortgagees. That is why the cost of lending between banks is starting to go up as they beginning to ask for a premium for taking on unknown sub-prime sovereign debt risk. This is starting to freeze up credit by banks for all activities.

The transfer of banks losses during the credit crunch to governments and the deep recession have led to the deficit and debt crisis. The weak economies of these countries means that they will find it difficult to meet debt repayments particularly when loans have to renewed as lenders will demand much higher rates of interest.

All this means viscous attack are certain on the majority of the European population facing cuts in jobs, wages and services and tax rises to pay for a crisis not of their making.

For people in these countries the only alternative to austerity is for them to take control of their economies and carry out massive wealth redistribution. This is an alternative the SSP is fighting for in UK election and beyond.