Greece follow-up # 1 — Greece isn’t the only one with too much debt

Maybe Greece’s bad situation will get resolved (seems to be happening but there remains potential to derail it all). Greece’s current untenable debt burden stands at 177% of GDP, and the country is enduring an unemployment rate hovering around 26%. It’s worth being aware that Greece is not alone in this situation.  Closer to home, Illinois and Puerto Rico are both staring down the barrel of billions in unpayable debt.

Illinois is facing a partial government shut down because no state budget has been passed. Puerto Rico has more municipal bond debt per capita than any other American state and is facing a historic economic collapse as a result of $72 billion dollars of debt that it cannot repay. Greece, Illinois, and Puerto Rico are noteworthy because they’ve declared openly they can’t pay down their debt.

Worldwide debt levels in general are high. Here are some countries with the highest debt as a percentage of GDP:

Country Debt as a percentage of GDP
Japan 230%
Greece 177%
Italy 132%
Portugal 130%
Ireland 109%
Belgium 106%
United States 101%

(For a worldwide debt to GDP ratio list, see here)

The common denominator here isn’t the pensions at stake or billions of debt. In all instances, there is a lack of forethought and years of denial coupled with an inability to make the necessary concessions (on both sides) no matter how painful. Financial markets don’t seem to care much right now. Maybe that will change. Maybe not. It’s hard to predict when a local microcosm will create turmoil on a broader scale.

 

Sources: Puerto Rico’s Slide (Bloomberg); 10 Facts about Illinois’ budget showdown (Illinoispolicy.org); The Greek debt crisis story in numbers (British Broadcasting Corporation); Country list Government debt to GDP (tradingeconomics.com)

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