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The financial entanglement of the European countries magnifies the risk of

sovereign debt contagion

owes to… Total debt Debt to European Ireland Portugal Spain Italy Greece France Germany UK
Debt Owned within a Short List short list
Ireland 867 488.8 22 16 18 0.8 60 184 188
of European Countries Portugal 286 214.2 5.4 86 6.7 0.1 45 47 24
December 2009, in billions of $US Spain 1,100 661.4 30 28 31 0.4 220 238 114
Italy 1,400 876.9 46 5.2 47 0.7 511 190 77
Greece 236 161.4 8.5 9.7 1.3 6.9 75 45 15
$60b Debt from PIIGS 89.9 64.9 150.3 62.6 2 911 704 418
Debt from PIIGS as % of GDP 40% 29% 10% 3% 1% 34% 21% 19%
$184b GDP 227 227 1464 2118 330 2675 3352 2183
Ireland
(billion of USD)
$867b
$188b $0.8b
UK
$3,877b Germany $511b The Situation is Unfolding…
$8.5b $1,088b

 Standard & Poor's cut the long-term


$190b sovereign credit rating on Greece from
$46b BBB+ to BB+ (junk status)
 S&P downgraded its rating on Portugal's
$18b
$77b debt by 2 notches to A-minus.
$22b $5.4b  Ironically - short term - France and
$30b France
$16b $1,311b Italy Germany are benefiting from a “flight to
$1,400b quality” from investors.
$45b $6.7b (total debt) $6.9b  However given their significant ‘lines of
$6.2b credit’ from the PIIGS France, Germany
$47b Greece owes:
$47b Portugal $0.7b and the UK might have a pb: France 34%
$286b Greece $76b of GDP, Germany 21% and the UK 19%.
$24b Spain $31b
$236b a default would compromise them
$96b $1,100b
$1.3b $45b
 The EU and the IMF have proposed a
$28b bailout package of euro110 billion
$0.4b $15b
(US$143b) on 4th May 2010

$220b $238b $114b


Source: Bank for International Settlements, 2009 data

The Other School of Economics


5 May 2010