Skip to comments.The 10 Countries Deepest in Debt (Congratulations, we're in the top 10)
Posted on 02/14/2012 8:57:19 AM PST by SeekAndFind
The Greek government on Sunday agreed to drastic austerity measures in the hopes of securing a 130 billion euro bailout from international creditors the second bailout in two years. The measures include dramatic cuts in pay, pensions and government services.
The creditors, which include the European Commission, the International Monetary Fund and the European Central Bank, demanded that by Wednesday Greece show clear evidence of how it will make 325 million euro of the 3.3 billion euro cuts. Greece, which has among the worst debt in the world, faces default as early as March if it does not get the bailout.
In addition to Greece, several European Union member countries now face overwhelming government debt. On Monday, Moodys downgraded six countries, including Italy, Portugal and Spain. Other countries, like Germany and Japan, also have burdensome debts, but unlike Greece or other troubled EU members, their debt problems are not unmanageable. 24/7 Wall St. has identified the countries that have the highest debt-to-GDP ratios.
Many of the countries with the highest debt levels relative to their gross domestic products have been hit hardest by the global recession. Greece, Ireland and Portugal all have unemployment rates above 14%. Wealth in these countries is extremely low. In the case of Portugal, GDP per capita in 2010 was just $25,575, lower than every country in the developed world except Slovakia. The combination of extremely high debt, high liabilities and sinking national productivity has resulted in credit downgrades to below investment grade, or junk, bond status. Moodys rates Ireland Ba2, Greece Ca, and just downgraded Portugal to Ba3.
The increasingly dire situations of several of these nations have forced their governments to enact desperate measures or face financial and economic ruin. Greece is not the only country to recently pass and implement austerity measures. In November 2011, Portugal passed a new austerity budget, which raised taxes on the population and cut the wages of all government employees. In Italy, the retirement age has been raised, and levees on pensioners have gone up as well.
Not all of the countries with extremely high debt relative to their GDPs are doing poorly. Government debt of Germany and Japan is high, but these countries can afford it. Their high debt-to-GDP ratios are balanced by relatively strong economies and wealthy populations. Germany has the highest GDP in Europe and the fourth highest in the world. While Japans economy was derailed by the earthquake and resulting nuclear tragedy, it remains the third-largest economy by GDP.
Though countries like Germany, France, UK, the U.S. and Japan continue to have relatively stable economies despite their massive debt, this may not always be the case. Last year, Standard & Poors downgraded both France and the U.S. from perfect AAA ratings. Yesterday, Moodys gave France and the UK negative outlooks.
While many of these economies have started to recover from the recession, they continue to accrue debt. In some cases, even the worlds wealthiest economies have been forced to pass austerity measures of their own. Many U.S. states, for example, have made substantial cuts to government workforces.
24/7 Wall St. ranked developed countries by estimated general government debt as a percentage of nominal GDP for 2011, based on data provided by Moodys Statistical Handbook for 2011. 24/7 also reviewed nominal GDP, nominal GDP growth, GDP per capita (PPP) and sovereign credit rating from Moodys. All of the data from the handbook is an estimate for 2011, with the exception of GDP per capita, which is for 2010. Unemployment rates are from the Organisation for Economic Co-operation and Development.
These are the 10 countries deepest in debt.
10. United Kingdom
> Debt as a pct. of GDP: 80.9%
> General government debt: $1.99 trillion
> GDP per capita (PPP): $35,860
> Nominal GDP: $2.46 trillion
> Unemployment rate: 8.4%
> Credit rating: Aaa
Although the UK has one of the largest debt-to-GDP ratios among developed nations, it has managed to keep its economy relatively stable. The UK is not part of the eurozone and has its own independent central bank. The UKs independence has helped protect it from being engulfed in the European debt crisis. Government bond yields have remained low. The country also has retained its Aaa credit rating, reflecting its secure financial standing.
> Debt as a pct. of GDP: 81.8%
> General government debt: $2.79 trillion
> GDP per capita (PPP): $37,591
> Nominal GDP: $3.56 trillion
> Unemployment rate: 5.5%
> Credit rating: Aaa
As the largest economy and financial stronghold of the EU, Germany has the most interest in maintaining debt stability for itself and the entire eurozone. In 2010, when Greece was on the verge of defaulting on its debt, the IMF and EU were forced to implement a 45 billion euro bailout package. A good portion of the bill was footed by Germany. The country has a perfect credit rating and an unemployment rate of just 5.5%, one of the lowest in Europe. Despite its relatively strong economy, Germany will have one of the largest debt-to-GDP ratios among developed nations of 81.8%, according to Moodys projections.
> Debt as a pct. of GDP: 85.4%
> General government debt: $2.26 trillion
> GDP per capita (PPP): $33,820
> Nominal GDP: $2.76 trillion
> Unemployment rate: 9.9%
> Credit rating: Aaa
France is the third-biggest economy in the EU, with a GDP of $2.76 trillion, just shy of the UKs $2.46 trillion. In January, after being long-considered one of the more economically stable countries, Standard & Poors downgraded French sovereign debt from a perfect AAA to AA+. This came at the same time eight other euro nations, including Spain, Portugal and Italy, were also downgraded. S&Ps action represented a serious blow to the government, which had been claiming its economy as stable as the UKs. Moodys still rates the country at Aaa, the highest rating, but changed the countrys outlook to negative on Monday.
7. United States
> Debt as a pct. of GDP: 85.5%
> General government debt: $12.8 trillion
> GDP per capita (PPP): $47,184
> Nominal GDP: $15.13 trillion
> Unemployment rate: 8.3%
> Credit rating: Aaa
U.S. government debt in 2001 was estimated at 45.6% of total GDP. By 2011, after a decade of increased government spending, U.S. debt was 85.5% of GDP. In 2001, U.S. government expenditure as a percent of GDP was 33.1%. By 2010, is was 39.1%. In 2005, U.S. debt was $6.4 trillion. By 2011, U.S. debt has doubled to $12.8 trillion, according to Moodys estimates. While Moodys still rates the U.S. at a perfect Aaa, last August Standard & Poors downgraded the country from AAA to AA+.
> Debt as a pct. of GDP: 97.2%
> General government debt: $479 billion
> GDP per capita (PPP): $37,448
> Nominal GDP: $514 billion
> Unemployment rate: 7.2%
> Credit rating: Aa1
Belgiums public debt-to-GDP ratio peaked in 1993 at about 135%, but was subsequently reduced to about 84% by 2007. In just four years, the ratio has risen to nearly 95%. In December 2011, Moodys downgraded Belgiums local and foreign currency government bonds from Aa1 to Aa3. In its explanation of the downgrade, the rating agency cited the growing risk to economic growth created by the need for tax hikes or spending cuts. In January of this year, the country was forced to make about $1.3 billion in spending cuts, according to The Financial Times, to avoid failing to meet new European Union fiscal rules designed to prevent a repeat of the eurozone debt crisis.
> Debt as a pct. of GDP: 101.6%
> General government debt: $257 billion
> GDP per capita (PPP): $25,575
> Nominal GDP: $239 billion
> Unemployment rate: 13.6%
> Credit rating: Ba3
Portugal suffered greatly from the global recession more than many other countries partly because of its low GDP per capita. In 2011, the country received a $104 billion bailout from the EU and the IMF due to its large budget deficit and growing public debt. The Portuguese government now plans to trim the budget deficit from 9.8 percent of gross domestic product in 2010 to 4.5 percent in 2012 and to the EU ceiling of 3 percent in 2013, according Business Week. The countrys debt was downgraded to junk status by Moodys in July 2011 and downgraded again to Ba3 on Monday.
> Debt as a pct. of GDP: 108.1%
> General government debt: $225 billion
> GDP per capita (PPP): $39,727
> Nominal GDP: $217 billion
> Unemployment rate: 14.5%
> Credit rating: Ba1
Ireland was once the healthiest economy in the EU. In the early 2000s, it had the lowest unemployment rate of any developed industrial country. During that time, nominal GDP was growing at an average rate of roughly 10% each year. However, when the global economic recession hit, Irelands economy began contracting rapidly. In 2006, the Irish government had a budget surplus of 2.9% of GDP. In 2010, it accrued a staggering deficit of 32.4% of GDP. Since 2001, Irelands debt has increased more than 500%. Moodys estimates that the countrys general government debt was $224 billion, well more than its GDP of $216 billion. Moodys rates Irelands sovereign debt at Ba1, or junk status.
> Debt as a pct. of GDP: 120.5%
> General government debt: $2.54 trillion
> GDP per capita (PPP): $31,555
> Nominal GDP: $2.2 trillion
> Unemployment rate: 8.9%
> Credit rating: A3
Italys large public debt is made worse by the countrys poor economic growth. In 2010, GDP grew at a sluggish 1.3%. This was preceded by two years of falling GDP. In December 2011, the Italian government passed an austerity package in order to lower borrowing costs. The Financial Times reports that according to consumer association Federconsumatori, the governments nearly $40 billion package of tax increases and spending cuts will cost the average household about $1,500 each year for the next three years. On Monday, Moodys downgraded Italys credit rating to A3, from A2.
> Debt as a pct. of GDP: 168.2%
> General government debt: $489 billion
> GDP per capita (PPP): $28,154
> Nominal GDP: $303 billion
> Unemployment rate: 19.2%
> Credit rating: Ca
Greece became the poster child of the European financial crisis in 2009 and 2010. After it was bailed out by the rest of the EU and the IMF, it appeared that matters could not get any worse. Instead, Greeces economy has continued to unravel, prompting new austerity measures and talks of an even more serious default crisis. In 2010, Greeces debt as a percent of GDP was 143%. Last year, Moodys estimates Greeces debt increased to 163% of GDP. Greece would need a second bailout worth 130 billion euro the equivalent of roughly $172 billion in order to prevent the country from defaulting on its debt in march.
> Debt as a pct. of GDP: 233.1%
> General government debt: $13.7 trillion
> GDP per capita (PPP): $33,994
> Nominal GDP: $5.88 trillion
> Unemployment rate: 4.6%
> Credit rating: Aa3
Japans debt-to-GDP ratio of 233.1% is the highest among the worlds developed nations by a large margin. Despite the countrys massive debt, it has managed to avoid the type of economic distress affecting nations such as Greece and Portugal. This is largely due to Japans healthy unemployment rate and population of domestic bondholders, who consistently fund Japanese government borrowing. Japanese vice minister Fumihiko Igarashi said in a speech in November 2011 that 95% of Japanese government bonds have been financed domestically so far, with only 5% held by foreigners. Prime Minister Yoshihiko Noda has proposed the doubling of Japans 5% national sales tax by 2015 to help bring down the nations debt.
Thats really the only word we can use to describe the release of a sensitive and confidential 57 page memo, written by then soon-to-be U.S. Treasury Secretary Larry Summers in December 2008, about what became President Obamas signature economic program in the first year of his presidency: the stimulus package.
James Pethokoukis has summarized some of the most significant aspects of the memo, which weve excerpted below, and which reveals the Obama administrations thinking behind what became an over 821 billion dollar boondoggle. The bold text represents Pethokoukis summary of that thinking, which is directly followed by a supporting quotation from Larry Summers memo:
1. The stimulus was about implementing the Obama agenda. The short-run economic imperative was to identify as many campaign promises or high priority items that would spend out quickly and be inherently temporary.... The stimulus package is a key tool for advancing clean energy goals and fulfilling a number of campaign commitments.
2. Team Obama knows these deficits are dangerous (although it has offered no long-term plan to deal with them). Closing the gap between what the campaign proposed and the estimates of the campaign offsets would require scaling back proposals by about $100 billion annually or adding new offsets totaling the same. Even this, however, would leave an average deficit over the next decade that would be worse than any post-World War II decade. This would be entirely unsustainable and could cause serious economic problems in the both the short run and the long run.
3. Obamanomics was pricier than advertised. Your campaign proposals add about $100 billion per year to the deficit largely because rescoring indicates that some of your revenue raisers do not raise as much as the campaign assumed and some of your proposals cost more than the campaign assumed.... Treasury estimates that repealing the tax cuts above $250,000 would raise about $40 billion less than the campaign assumed.... The health plan is about $10 billion more costly than the campaign estimated and the health savings are about $25 billion lower than the campaign estimated.
4. Even Washington can only spend so much money so fast. Constructing a package of this size, or even in the $500 billion range, is a major challenge. While the most effective stimulus is government investment, it is difficult to identify feasible spending projects on the scale that is needed to stabilize the macroeconomy. Moreover, there is a tension between the need to spend the money quickly and the desire to spend the money wisely. To get the package to the requisite size, and also to address other problems, we recommend combining it with substantial state fiscal relief and tax cuts for individuals and businesses.
5. Liberals can complain about the stimulus having too many tax cuts, but even Team Obama thought more spending was unrealistic.
As noted above, it is not possible to spend out much more than $225 billion in the next two years with high-priority investments and protections for the most vulnerable. This total, however, falls well short of what economists believe is needed for the economy, both in total and especially in 2009. As a result, to achieve our macroeconomic objectivesminimally the 2.5 million job goalwill require other sources of stimulus including state fiscal relief, tax cuts for individuals, or tax cuts for businesses.
6. Team Obama thought a stimulus plan of more than $1 trillion would spook financial markets and send interest rates climbing. To accomplish a more significant reduction in the output gap would require stimulus of well over $1 trillion based on purely mechanical assumptionswhich would likely not accomplish the goal because of the impact it would have on markets.
Personally I think the assessment of Japan is far too rosy. They are screwed demographically, and with that much debt and population decrease will be that much worse in effect.
I don’t see their future going well.
As I recall the replacement rate for a stable population is around 2.1 children per family.
Japan sits under 1.4 - that’s pretty serious.
If I were to wait by my TV or newsstand for the DBM to report this story, in 3 months time someone would discover my dead, dusty body still waiting.
According to a story covered by Rush yesterday, the budget that Obama released yesterday officially puts US debt at 107% of GDP and the money in the budget for FY2013 AND FY2014 is already spent! In addition, it will increase the national debt from a current $1+ Trillion per year to OVER $2+ Trillion per year!!
This, then, if the story is accurate, puts us even HIGHER on that list that it currently indicates!!
Ladies and gentlemen . . . . . . . we’re hosed!!
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