Word: defaulting
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...months ahead, Egypt's financial crisis, the worst in many years, may become increasingly difficult to brush aside. Unless Cairo can find a way to gain relief from payments coming due on its $35 billion foreign debt, it may be forced either to default on loans or to cut domestic spending so drastically as to risk provoking a political crisis. Since almost any new regime is likely to be more influenced by Islamic fundamentalists than Mubarak's has been, Washington has good reason to make sure that Egypt ultimately gets the aid it needs. Says one Western observer: "No matter...
...size of the request, say that negotiations on the terms of the loans could take months. But large creditors like New York's Citicorp ($2.8 billion already on loan to Mexico) will almost certainly have to go along with the IMF in order to reduce the risk of a default...
...this year's price declines will slash revenues by about $6 billion. That could make it virtually impossible for the cash-strapped country to meet payments on the $97 billion it owes to foreign countries. Some economists now estimate that Mexico stands an 80% chance of defaulting on its mountain of debt. Several experts say that conditions are already more dire than in 1982, when a temporary Mexican default sent ripples of panic through the international financial system...
...slashed government spending, shoved the economy into a painful recession, and boosted unemployment to about 15%. "The political system is being pushed into a corner," says Jonathan Heath, senior economist for Ciemex-Wharton, the Mexican division of Philadelphia-based Wharton Econometric. "A lot of people in the government want default, and though they are not the ones with the most clout now, at any given moment they could be heard...
...most immediate threat to the U.S. is financial. Bankers fear a default by hard-pressed oil producers, notably Mexico, which owes $97 billion, or Nigeria, a $17 billion debtor. Mexico alone owes about $70 billion to U.S. institutions, including Chase Manhattan and Bank of America. The banks, and probably the whole U.S. financial system, would be staggered if Mexico were to walk away from its debts...