Stratfor explains why Europe is struggling despite its limited exposure to U.S. subprime securities:
The euro’s adoption spread German-style, ultra-low interest rates to places like Finland and Spain, and the credit explosions that followed have been devastatingly powerful. Europe has found itself perfectly capable of getting embroiled in its own “subprime” messes, which in places like the United Kingdom, Ireland and Spain are much worse than anything seen in California. Every loan that was unwisely taken by a Central European was unwisely granted by a Western European, with Austrians and Swedes the worst offenders.
As usual, and as per the Austrians, excessively low interest rates were the primary culprit in bringing about the crisis. It’s nothing more complicated than the Iron Law of Supply and Demand applied to money. And, needless to say, making money cheaper and more ubiquitous isn’t going to solve a problem that was caused by making money less expensive in the first place.