Concerns over Rising Sovereign Debt Defaults in the Eurozone and Elsewhere

Roubini says rising sovereign debt leads to higher inflation or government defaults.

From Bloomberg:

Nouriel Roubini, the New York University professor who forecast the U.S. recession more than a year before it began, said sovereign debt from the U.S. to Japan and Greece will lead to higher inflation or government defaults.

“The thing I worry about is the buildup of sovereign debt,” said Roubini, a former adviser to the U.S. Treasury and IMF consultant, who in August 2006 predicted a “painful” U.S. recession that came to fruition in December 2007. If the problem isn’t addressed, he said, nations will either fail to meet obligations or see faster inflation as officials “monetize” their debts, or print money to tackle the shortfalls.

Roubini, who teaches at NYU’s Stern School of Business, told attendees at the Beverly Hilton hotel that “Greece is just the tip of the iceberg, or the canary in the coal mine for a much broader range of fiscal problems.”

Greece “could eventually be forced to get out” of the 16- nation euro region, said Roubini in a Bloomberg Television interview yesterday. That would lead to a decline in the euro and make it “less of a liquid currency,” he said. While a smaller euro zone “makes sense,” he said, “it could be very messy.”

“Eventually, the fiscal problems of the U.S. will also come to the fore,” Roubini said during the panel discussion. “The risk of something serious happening in the U.S. in the next two or three years is going to be significant” because there’s “no willingness in Washington to do anything” unless forced by the bond markets.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aEv_4Sp6xERU&pos=3

It‘s not just Greece, Spain, Portugal, Italy, or the U. K. Switzerland holds as much Greek debt as France does.

http://www.guardian.co.uk/business/2010/feb/11/greece-debt-france-switzerland

Of course, concerns over the sovereign debt crisis are not limited to the Europe. The U.S. and Japan are in the same boat as discussed before.