Who's More Screwed: The US Or Greece?

dollar euro

According to the International Monetary Fund, the answer is not as clear as you might think.

The sovereign debt crisis in Europe has been brewing for some time now, and experts (should I use scare quotes? Fine) “experts” have been chomping at the bit to relay just how awful and intrasigent these indigents are.

Some have suggested, for example, that Greece make whatever cuts necessary (even to the point of starving its senior citizens) to pacify the bankers to whom great debt is owned.

Others have taken the other route, offering that the best solution for Greece is a simple “we’re not paying the debt” followed by 3-4 years of dodging creditors’ phone calls. Note to Greece: the banks will be back to lend you more money, just like credit card offers flow in the mail of every bankrupted American. They cannot help themselves. Banks are addicted to lending almost as much as you are to spending.

Greece is not the only one condemned in the media by creditors and creditor nations. Portugal, Ireland, Spain, Italy, and even France, have taken turns as the whipping boys for banks — banks who once again wanted to privatize the profits of those bonds and now seek to socialize the losses, spreading the risk around to the entire world while reaping the benefits.

Yet, are these nations truly the harbingers of gluttony and misappropriation of funds as the banksters would have us believe? Perhaps not.

Let’s take a look at the IMF’s statistics on debt-to-GDP ratios. This ratio gives us a good understanding of where a nation stands in terms of how much it owes, relative to how much is produced in the country. The lower the ratio, the more likely it is that a country has the means to pay off its debts.

Notable Debt to GDP Ratios

  • Japan: Oh Japan. Japan’s debt-to-GDP ratio is worst in the world. It is astronomical, in large part because the economy was so brutally damaged by the earthquake/tsunami/nuclear disaster last March. On top of that decline in revenues, they’ve also been borrowing heavily to start the rebuilding process. They were already sitting in trouble after a lost decade of productivity. Still, don’t expect the 225.8% ratio to stay, or for Japan to be atop this list for years to come. They’re a nation of savers and once the economy rebounds, they will thrive.
  • Greece: Believe it or not, the much-maligned Greece economy is only (only?) fifth-worst in the world. They currently ride in around 130% of GDP, which could go down, depending on how Europe decides to play their sovereign debt crisis.
  • Italy: Just below Greece (literally, one spot below) is Italy. Italy’s debt ratio is almost as bad as Greece’s, sitting at 118% of GDP, and yet no one is calling on Italy to default, kill its old folks, and run screaming into traffic. Why…it’s almost like there is a macro-political angle to the theory that Greece needs to pay up now and Italy can sip vino and think about it.
  • Ireland: Rounding out the top 10 is Ireland with a hearty 93.6% ratio. Talk to anyone in Europe, and they’re panicking over how Ireland can ever pay that back. Those who worship at the altar of Tax Cuts may want to note: Ireland has the lowest corporate tax rates in the civilized world. All they get for that generosity is massive debt and a government that cannot afford basic services. (I’ll translate that for the slower folks: low taxes on corporations don’t spur a damn thing other than government debt. This is Exhibit A.) Meanwhile, one spot below Ireland, in 11th place, is…
  • The United States! That’s right. In terms of GDP to debt ratios, America is the 11th worst country in the world — barely better than Greece and all but tied with Ireland and Italy. The US is sitting at 92.7%, or roughly banana republic status. Keep those printing presses going, Bernanke! For all the bluster and bravado about the American experience, we’re in the same damn boat as Ireland. Yet everyone assumes the eurozone nations are screwed while America will somehow come through this unscathed.
  • France: For all the crap the French take, at 84% they’re more financially viable than the United States is…and they don’t starve their old people, throw sick people out on the street without health care, or let the top 1% of their society benefit at the expense of everyone else. They do, however, make a convenient foil for semi-literate radio hosts. Freedom Fries!
  • Germany: You don’t have to go too far down the list to see that Europe just might be screwed. Germany is often tossed up as the example of a “good” economy, in terms of its social programs and growing economy, as well as how it treats its workers. Germany is who the other euro nations turn to when they need a bailout. And yet, Germany is the 22nd worst country in the world for debt, settling in with a 74.3% ratio. If that’s the biggest and best the Europeans can do, it may be time to short the euro.

— John Thorpe

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