Tens of thousands of Greeks are upset at their government's response to the country's growing debt crisis, particularly its plans to cut 30 billion euros from its budget over the next two years and to raise taxes. The austerity measures will hit Greeks hard, so they went to Athens' streets as part of a general strike that targeted transportation networks, schools and hospitals.
Led by annual economic growth of about 4 percent between 2003 and 2007, along with easy credit and big consumer spending, Greeks grew economically fat. Per capita GDP last year was at $32,100 — just below Japan but above Italy, Israel, Taiwan and South Korea. The Greek story can be found in Portugal, Spain, Italy, Ireland and even the United States and Japan, the world's two largest economies. Each of these countries has enjoyed long periods of economic expansion. Each has been hit by the global economic crisis. Each suffers from high debt levels, which means they are — like Greece — at risk of market pressures to get their own finances in order. (Portugal and Spain have already had their debt ratings downgraded as well). That means when government spending cuts and tax raises come, these populations will also be annoyed. Their expectations about the future will not meet their new realities. The debt of much of Europe will need to be aggressively restructured. Japan, with a 2 to 1 ratio of debt to GDP, is perhaps the least talked-about time bomb. Of course, every country is different, with different economic and political circumstances.
However, economic growth (some percent at least) has returned to many key countries, which helps reducing debt worries. But if this complex crisis rolls over from Europe, to perhaps Asia, the U.S. or beyond every country will face big problems financing their debts.
György Kovácsházi
Gold Forex
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