Many European governments have a rapidly escalating debt and revenue problem.
Private corporations, on the other hand, don’t:
Liabilities as a percentage of earnings in the benchmark Stoxx Europe 600 Index dropped 22 per cent last quarter, the most since 2003, according to data compiled by Bloomberg. Analysts say annual profit growth in Europe will average 46 per cent in 2010 and 2011, more than at any time in the previous seven years. The projected income would push valuations down to the lowest levels on record excluding the three months after Lehman Brothers Holdings Inc.’s bankruptcy in September 2008, the data show.
While debt has fallen for Europe’s companies, government liabilities as a proportion of gross domestic product climbed, partly due to the cost of bailing out banks. European Union government debt reached 77.5 per cent of GDP this year from 58.5 per cent in 2007, according to data from the IMF. The ratio will reach 82 per cent in 2012, IMF data show.
Europe’s private sector is far from crisis.