Euro-crisis led year’s top business stories
AP Business Writer
NEW YORK – Europe took the financial world on a stomach-churning ride in 2011.
The rising threat of default by heavily indebted European countries spread fear across financial markets and weighed on economies worldwide. As the year came to a close, banks and investors nervously watched Europe’s political and financial leaders scramble to prevent the 17-nation eurozone from breaking apart.
Several of the other biggest business stories of the year highlighted the global economy’s linkages: A British phone-hacking scandal shook the foundations of Rupert Murdoch’s U.S.-based media empire; a nuclear disaster in Japan stymied auto plants in the U.S. and beyond; and the price of gasoline surged because of unrest in the Middle East and growing demand in Asia and Latin America.
In the U.S., political squabbling led to the first credit downgrade for government debt, the economy suffered its fourth straight disappointing year, and Apple founder Steve Jobs died.
The European financial crisis was chosen as the top business story of the year by business editors at The Associated Press. The sluggish U.S. economy came in second, followed by the death of Jobs.
1. EUROPEAN FINANCIAL CRISIS: The government-debt crunch rattled Europe’s financial system and weighed on the global economy. Portugal became the third European country, after Greece and Ireland the year before, to require a bailout as its borrowing costs soared. And investors grew worried that countries with much larger debts, such as Spain and Italy, would also need help.
Financial markets were volatile all year as hopes rose and then were dashed that forceful steps would be taken to prevent the financial crisis from becoming Europe’s version of the 2008 collapse of Lehman Brothers, which triggered a global financial panic and deepened the Great Recession.
Banks worried that they or their partners wouldn’t be able to cover losses if governments defaulted, so they cut back on lending. European governments, facing ever higher borrowing costs, reined in spending – a policy response that is expected to stunt much-needed economic growth. Analysts estimate the slowdown in Europe, America’s No. 1 trading partner, will cut U.S. economic growth next year.
2. BAD U.S. ECONOMY, YEAR FOUR: The Great Recession may have ended, but the economic recovery continued to disappoint. For the first six months of the year, the economy grew at an annual rate of just 0.9 percent. Growth improved to a 2 percent rate in the third quarter, and a 3 percent growth rate is forecast for the fourth quarter.
Still, 2 1/2 years after economists say the recession ended, 25 million people remain unemployed or unable to find full-time work. The unemployment rate fell from 9 percent in October to 8.6 percent in November, providing a hopeful sign. Yet the housing market remained burdened by foreclosures and falling prices in many metropolitan areas. How to fix the economy became the top campaign issue for Republican presidential contenders.
3. STEVE JOBS DIES: The college dropout who helped popularize the personal computer and created the iPod, iPhone and iPad died Oct. 5. That was two months after Apple Inc., which Jobs co-founded in a Silicon Valley garage in 1976, briefly surpassed Exxon Mobil Corp. as the most valuable publicly traded company in the world.
Jobs cultivated a countercultural sensibility and a minimalist design ethic. He rolled out one sensational product after another, even during the recession and as his health was failing. He first helped change computers from a geeky hobbyist’s obsession to a necessity of modern life. In recent years, he upended the music business with the iPod and iTunes, transformed the smartphone market with the iPhone, and created the tablet market with the iPad.
4. THE U.S. CREDIT DOWNGRADE: The inability of political leaders to come up with a long-term plan to reduce the federal budget deficit led the credit rating agency Standard & Poor’s to take away Uncle Sam’s sterling AAA credit rating for the first time. The political bickering enraged voters, spooked investors and led to the lowest consumer confidence level of the year. But the nation’s long-term borrowing costs fell after the crisis. The reason: U.S. debt still looks safer to investors than almost everything else, especially European debt.
5. RUPERT MURDOCH AND THE HACKING SCANDAL: The man whose worldwide media empire thrives on covering scandal became the center of a dramatic one. A British tabloid newspaper owned by Murdoch’s News Corp., which also owns Fox News and The Wall Street Journal, hacked the phone of a murdered schoolgirl. Murdoch was not charged with a crime, but an investigation by British authorities raised questions about Murdoch’s ability to run his worldwide media empire. News Corp. fired several executives and closed the News of the World.
6. JAPAN EARTHQUAKE: An earthquake and tsunami that crippled the Fukushima Dai-ichi nuclear reactor, owned by Tokyo Electric Power Co., cut off supplies of crucial Japanese parts and idled factories thousands of miles away. Auto companies, especially Toyota and Honda, were hit hardest. Inventory of certain models, especially hybrids, fell short at dealerships, reducing sales and sending retail prices higher. The worst nuclear accident since Chernobyl led countries around the world to reconsider nuclear power.
7. GASOLINE PRICES HIT ANNUAL RECORD: The retail price of gasoline averaged $3.53 per gallon for the year, eclipsing the 2008 record of $3.24 per gallon. Americans drove less and switched to more fuel-efficient cars, but it wasn’t enough to offset the higher prices. A bigger percentage of household income went into the gas tank in 2011 than any year since 1981. Economists say the high prices shaved half a percentage point off U.S. economic growth.
8. SOCIAL MEDIA IPOs TAKE OFF: Shares of the business social networking site LinkedIn more than doubled when it went public in May, recalling the froth of the dot-com boom. LinkedIn was followed by large IPOs from online radio company Pandora Media, online discount site Groupon and social gaming site Zynga. But the market is treacherous: Shares of Pandora, Groupon and Zynga all traded below their offering prices soon after they were listed.
9. OCCUPY WALL STREET: On Sept. 17, several hundred protesters gathered at a small plaza about a block from the New York Stock Exchange. They slept in tents, ate donated meals and protested what they called income inequality and the influence of money in politics. The movement inspired protesters around the world who camped in city centers and business hubs.
10. THE DOWNFALL OF MF GLOBAL AND JON CORZINE: The former governor, senator and co-chairman of Goldman Sachs lost control of a small brokerage firm he agreed to run in 2010. Saddled with huge debt and risky bets on European bonds, MF Global was forced to file for bankruptcy protection on Halloween after trading partners and investors got spooked. It was soon discovered that $1.2 billion in customer money was missing. Corzine told Congress he had no idea where the money went.