The Economic Advisor

Our Rising Legacy of National Debt

In some of the Worlds reputed wealthy Countries the National debt has risen sharply since September 2008. Debt levels that would have been deemed unacceptable in the old economy,- but acceptable in the face of jumpstarting our battered economies.

What are the current levels of National debt in four of the World’s largest Economies?

1): The United States

By late 2008, the percentage of debt versus the Gross domestic product of the USA was around 70%. This is now set to rise to an estimated 82.5% by the start of this year. This rising debt is being used to stall, and kick start the economy, but leaves little room to increase- if a further stimulus package is needed in 2010.

2): France

France has always had a “mixed” economy, and the current French Government has tried to protect this, whilst also reforming parts of the economy. However the French National debt has risen from 72% in 2008, to an estimated 79% by the start of 2010.

France still faces high unemployment, and lower tax revenues, but still has some scope to continue borrowing, if any new stimulus packages are needed.

3): The United Kingdom

Britain was one of the worst hit countries in the 2008 Market crash. And from a more “Free Market” economy, has returned to a more “mixed” economy by bailing out or nationalizing most of the nations Banks. This has created an increased debt ratio of almost 70% by 2010, from 58% before September 2008.

Britain’s problems still lie in the fact the old economy was primarily fuelled by Real Estate speculation, and the Financial Services Industry. The national Debt increased mainly because of high cost bailouts of the Countries Banks.

4): Germany

Germany has still not recovered from the high cost of reunification in 1990. Although the country has a quite low debt ratio compared to some of its neighbors. Germany’s wealth gap is one of the largest in Europe- between the wealthiest and poorest citizens. Currently the nation’s debt is set around 66%, but could increase if the nations ‘tight’ credit policy is relaxed to balance the increasing wealth gap, and boost its economy.

High debt ratios are a cost of the failure of the old economy, however they may need to be reduced, once our economies recover from the recession. If the mixture of bailouts, stimulus packages and other incentives fail to start their economies- Then a second round of stimulus packages may not be feasible.

Read more about life in Jakarta- a City of contrasts, where the uniqueness of a modern world is still entwined in belief of the mysterious.

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