Word: sovereignity
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...right to be worried. The debacle in Greece could be a harbinger of a new stage of the financial crisis, one in which irresponsible politicians, not bankers, are the main source of economic turmoil. Across the developed world, sovereign states have amassed potentially unsustainable mountains of debt. The Organization for Economic Cooperation and Development (OECD) forecasts that by 2011 the ratio of government debt to gross domestic product - the main measure of a state's financial health - will reach 100% in the U.S., up from 62% in 2007. That's almost as large as Greece's burden today. Ireland...
...certain extent, mounting sovereign debt is a natural outcome of the recent recession. As in any downturn, tax revenues shrank but government spending increased to stimulate sagging economies. The result: budget deficits and more borrowing. Expensive banking-sector bailouts made the burden even heavier. That's not automatically dangerous. There is no particular level of debt that acts as a trip wire and tosses an economy into crisis. Different economies can bear different levels of government debt, depending on their ability - real or perceived - to finance it. While Greece's small and uncompetitive economy is struggling to stay afloat, Japan...
...That doesn't mean there's no downside. Supersized sovereign debt is likely to depress economic growth. Hefty debt payments lead to heftier taxes, which bite into consumer spending and corporate investment. Economists Carmen Reinhart of the University of Maryland and Kenneth Rogoff of Harvard University found in a recent study that once a country's government-debt-to-GDP ratio passes 90%, growth declines by at least one percentage point a year. For industrialized economies that rarely expand more than 2% or 3% a year, that's a huge chunk. "We're coming at a point in which growth...
...also inevitable. Pressure is building on political leaders to prove they're serious about getting their countries' finances in order. In late January, S&P warned that it could downgrade Japan's sovereign rating if the new administration of Prime Minister Yukio Hatoyama doesn't rein in the deficit. In his January State of the Union address, President Barack Obama pledged to freeze discretionary fiscal spending for three years starting in 2011. "Like any cash-strapped family, we will work within a budget to invest in what we need and sacrifice what we don't," Obama said. (See pictures...
...oversee its creation, most likely on the outskirts of Moscow. It is an unusual role for him. Both under Putin's presidency between 2000 and 2008 and now under Medvedev's, Surkov has been widely seen as Russia's éminence grise. He is the author of the "sovereign democracy" theory that underpins Russia's neo-authoritarianism and the engineer of the Kremlin youth group Nashi, which uses strategic thuggery to discourage opposition. Now he has embraced his role as Russia's innovation guru...