Unfolding Sovereign Debt Crisis

There has been much talk over unfolding Greece’s sovereign debt crisis this week, yet Greece is just one of several global financial concerns. The advanced economies like the U.S., Japan, and the U.K. face serious sovereign debt problems as mentioned before. Quite a few EU countries including Greece, Ireland, Spain, Portugal, and Italy have to deal with the debt deleveraging as well.

How will the worldwide debt crisis unfold in the coming years? Could the worldwide debt unwind without pain for much of humanity? It could be resolved if sound interventions, not short-term gimmicks for political purposes, are put in place, but it doesn’t seem to look that way as politicians including the EU bureaucrats try to postpone the massive world debt crisis

Government spending in Greece is over 51% of GDP. China’s internal spending to GDP is 7:1. Japan’s national debt is 200% of GDP. The U.S. has the largest amount of debt in the world. The U.S. are at over $100 trillion in debt and still counting (Some argue that its real debt-to-GDP ratio is 130%.)

In the meantime in a policy meeting Wednesday, Korea’s Finance Minister Yoon Jeung-hyun said Korea’s fiscal status is sound compared to other advanced economies. He explained that Korea’s fiscal deficit accounts about 5% of last year’s GDP, which is far below the European average of 12%.

However, some scholars like Kim Chung-shik at Yonsei University warn that there is a high chance Korean will repeat the financial crisis. For example, Korea’s debt increased to 35.6% of GDP last year. Furthermore, the National Statistical Office has announced that the number of unemployed in January exceeded 1 million for the first time in 9 years, driving the jobless rate from 3% to 5%.