Top business story of 2011: The euro zone mess

Columns of the Parthenon temple are seen behind a European Union flag in Athens, Greece, Nov. 4, 2011. AFP/Getty Images

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 euro zone 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.

MoneyWatch: Will the economy turn around in 2012?

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 and a half 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 on Oct. 5. That was two months after Apple Inc., which Jobs started 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 smart phone 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 newspaper at the center of the scandal, the News of the World.

What other stories made the top 10 list in 2011? Find out on page two.

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