Debt Levels Relative to GDP of PIIGS and Some Other Major Countries

Debt to GDP of PIIGS plus Major Countries

For some perspective on the European sovereign debt crisis, this chart illustrates the forecasted 2012 debt to GDP ratio for each of the PIIGS (red bars) plus a handful of today's major economies (blue bars).
 
120625 Chart of the Day - Debt Levels Relative to GDP 
While the PIIGS are currently enduring relatively high debt loads, it is noteworthy how some of the relatively safe nations/bond markets (e.g. United State and Germany) are not far behind.
These relatively high debt loads are of concern as they could lead to higher taxes sometime in the future and can risk fiscal crises if bond holders sense an increasing risk of default.
The current crisis in Europe provides a clear example of the bond market's reaction (i.e. higher bond yields) to increased default fears.
This leads to a very interesting case study that is Japan. With a debt to GDP ratio of over 200%, the Japanese 10-year bond yield is a relatively low 0.83%. Why? At the moment, the bond market feels that the Japanese have the ability to repay their debts — in part due to Japan's perceived ability to raise taxes. To that end, Japanese Prime Minister Yoshiko Noda just won opposition support for the doubling of the nation's sales tax to 10% by 2015.
So it's not just the amount of debt but also convincing your banker that you are good for it.
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Comments

11 responses to “Debt Levels Relative to GDP of PIIGS and Some Other Major Countries”

  1. Cash Loan Avatar

    The matter according to me has been thrown in dust-bin and diplomats are having fun with the increased rates and economy. Quite astonished that the people who are answerable for such situation for rising debt are playing with the economy. If some serious won’t be applied immediately then I don’t think there would be anything left for anyone.

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