The confidence of the financial markets in the creditworthiness of European countries with high sovereign debt loads has suffered considerably in previous months. The funding costs for countries with comparatively low levels of debt have also increased. With respect to the real economy, although Europe has lost momentum, there were no signs of a serious drop in economic output. However, the political response of using strict austerity plans to solve the debt crisis creates a danger of dampening economic activity.

According to a November 2011 forecast by the Vienna Institute for International Economic Studies (wiiw – Wiener Institut für Internationale Wirtschaftsvergleiche), real GDP in the European Union (EU-27) grew by 1.7% in 2011, following growth of 1.9% in the previous year. At that time, the new EU countries (NMS-10) were forecast to have a considerably higher GDP growth rate of 3.0% in 2011, following an increase of 2.1% in the previous year. The labour market situation continues to be tense in Europe, with the latest figures showing especially high unemployment rates in Spain, Greece, Ireland, Portugal, the Baltic countries, Slovakia and Bulgaria.