MPDD Policy Briefs No.4, August 2010 " The European debt crisis: implications for Asia and the Pacific"

MPDD Policy Briefs No.4, August 2010 " The European debt crisis: implications for Asia and the Pacific"

Date: 
Tuesday, August 17, 2010
Type: 
Public information and advocacy materials
Abstract

Asia-Pacific economies are increasingly concerned about the impact of the public debt crisis in a number of European economies. In recent months, the scale of public debt in Greece in particular, but also in Ireland, Portugal and Spain, has led to credit downgrades and increases in the debt servicing costs of those countries. In response, their Governments have pledged to close their fiscal deficits and decrease their levels of debt in the coming years through stringent programmes of budget cuts, as affirmed recently by the G-20. Further compounding the fiscal gap are ageing societies and decades-old weak economic growth which will require additional resources as well as leading to declining tax proceeds. Consequently, the global financial markets have yet to be convinced that the affected countries will be able to reduce budget deficits sufficiently to lower public debt to the level required. The worst-case scenario of sovereign debt defaults in one or more European countries at some point remains a concern.

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