Greek Debt/GDP: Only 22% In 1980

This graph shows the government debt to GDP ratio for Greece. As you see the debt was mostly accumulated in the eighties. I will sum up some of the events which are of most importance this this graph:

• In the 1980's spending as a percentage of GDP rose by 19 points from 24% in 1980 to 43% in 1988, while revenue rose by only 7 points form 20% to 27%.
• In the beginning of the 90's Greece was in recession twice (1990 and 1993). The deficit and the borrowing cost both spiked to over 10%. 
• Starting in 1993 the government started a policy of fiscal consolidation to get permission to join the Euro-Zone. The deficit shrank to 3% of GDP and the borrowing costs fell to just 6% in 2000.
• When Greece was allowed to enter the Euro-Zone the 'fiscal discipline' faded away and budget deficits began to rise again. This was not followed by higher borrowing yields though, which may had something to do with the distorting of the numbers by the Greek government.

Greek Default Watch

Graph: United States Debt Deal

Yesterday the United States Government Debt Deal to raise the debt ceiling was signed by president Obama after it passed both the House and the Senate. 

• The deal will allow president to raise the debt ceiling by at least 2.1 trillion dollar.
• Total of 2.4 trillion dollar budget savings over 10 years.
• Of which 917 billion dollar in discretionary (optional) spending now, including 350 billion dollar on the defense budget.
• A 12-member congressional committee will fill in the rest of the 1,5 trillion dollar by November 23. Congress will vote about the results on December 23.

IMF WEO Spring 2011: Fiscal Balance Adjustment

The IMF says the following about fiscal deficits in developing countries: 'For 2011, fiscal consolidation is expected to be modest in advanced economies. As a result, the adjustment required to achieve prudent debt levels by 2030 remains very large'.

The next graph gives the: 'cyclically adjusted primary balance adjustment needed to bring the debt ratio to 60 percent by 2030. For Japan, the scenario assumes a reduction in net debt to 80 percent of GDP; this corresponds to a gross debt target of about 200 percent of GDP.'

Source: IMF

The United States still has to do a lot of adjustment as you can see. Germany has already met the fiscal adjustment it has to do.

CA: Canada, DE: Germany, ES: Spain, FR: France, GB: United Kingdom, IT: Italy, JP:
Japan, US: United States.