The cloud of global financial crisis
has not even cleared, and yet
another crisis of massive public debt already looms large over the
financial horizon. The governments across the globe, particularly those of the
developed economies, have been on a borrowing spree to shield their
economies, and this has inadvertently put enormous pressure on their exchequers.
As the all-pervading recession has dried up the tax revenues, the policy
makers across the globe have gone on a spending spree to get their economies back
on track and to prop up their banks. The upshot has been mounting
sovereign debt across the globe.
The world has not experienced this kind of borrowing binge ever since
the Second World War. It is now held that the soaring debt burdens of
countries across the globe could hold back the recovery of the global economy. A
few downgradings of sovereign debts (for example, leading rating agency
Standard & Poor's has downgraded its outlook
for British sovereign debt from `stable' to `negative') have already been
reported. And the International Monetary Fund (IMF) estimates that, by the next
year, the public debt of the 10 big rich nations will reach 107% of their GDP, up
from 78% in 2007, and touch 114% by 2014. It further notes that the world's
second largest economy, Japan and the big European nations like Italy, Germany
and France also carry very large debt loads. And the debt situation is more
serious in the US and UK, where debt loads used to be relatively low, but are
now rising at a very fast clip.
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