Greece: George Papandreou, Greece’s Socialist (Pasok) prime minister, is struggling to stop the country “falling over a cliff”, as he put it in a gloomy television address on February 2nd. Yet it was his late father Andreas, a spendthrift Pasok premier, who sowed the seeds of Greece’s crisis with a borrowing spree in the 1980s. The younger Mr Papandreou must now act quickly to curb Greece’s “triple deficit”—swollen budget and current-account deficits, plus a soaring public debt—or risk a humiliating loss of sovereignty to the European Union institutions in order to escape a sovereign default.
Portugal:
It was Portugal’s turn to feel the wrath of investors on Wednesday as the country’s bond market saw one of its biggest sell-offs this year.
Portugal’s benchmark 10-year bond yields, which have an inverse relationship with prices, rose a quarter of a point to 4.68 per cent as investors appeared to target Lisbon following plans announced by Greece to tackle its rising debt levels.
Gary Jenkins, head of fixed-income research at Evolution, said: “Investors decided to sell Portugal yesterday because the Greek announcement suggested Athens might be starting to get its act together.
“But this is not about nasty hedge funds deliberately targeting one country. The sellers of Portugal yesterday were all kinds of investor, from pension funds to hedge funds and banks. This is because of their worrying public finances.”
United States Of America: American deficits will not return to what are widely considered sustainable levels over the next 10 years. In fact, in 2019 and 2020 — years after Mr. Obama has left the political scene, even if he serves two terms — they start rising again sharply, to more than 5 percent of gross domestic product. His budget draws a picture of a nation that like many American homeowners simply cannot get above water.
For Mr. Obama and his successors, the effect of those projections is clear: Unless miraculous growth, or miraculous political compromises, creates some unforeseen change over the next decade, there is virtually no room for new domestic initiatives for Mr. Obama or his successors. Beyond that lies the possibility that the United States could begin to suffer the same disease that has afflicted Japan over the past decade. As debt grew more rapidly than income, that country’s influence around the world eroded.
Next month Italy and Spain ….