By the summer of 2009, it appeared that a financial meltdown had been avoided, and by the year’s end, many big banks were reporting large profits and all but one had repaid or were in the process of returning their bailout money to the federal government. But many businesses, especially small ones, reported that credit was still tight and only a fraction of those homeowners the Obama administration had hoped to help with a $75 billion foreclosure prevention program had reached agreements with their banks. Unemployment rose steadily all year to the highest levels seen in a generation, and anger over the crisis, the banks, the bailout and new rounds of large bonuses became a potent force in politics. The crisis gained a second wind in 2010 as revelations about the size of Greece’s debts rippled slowly across Europe and shook markets in the rest of the world. A new government there discovered that its deficits were three times the amount that had been acknowledged, leading investors to demand higher and higher interest rates, which in turn raised the likelihood that Greece would not be able to pay its debts. The crisis also revealed sharp divisions within the euro zone, as rich northern countries, Germany in particular, balked at a bailout of what was called “Club Med” – Greece, Italy, Spain and Portugal, countries all suffering from the bursting of the credit bubble but unable to devalue their currencies in response. As markets became increasingly nervous, a string of aid packages were announced, none of which calmed investors. Desperate to get ahead of the crisis, in May the European Union and the I.M.F. pledged to make 750 billion euros, or nearly $1 trillion, available to euro states in need.
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