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$7.6 Trillion Debt Looms Over World's Biggest Economies
By siliconindia
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Wednesday, 04 January 2012, 20:54 IST
Bangalore: The world's chief economies have a debt of more than $7.6 trillion maturing this year and the government is likely to face rise in borrowing costs.
According to the data released by Bloomberg, $7.4 trillion is the amount that comes up as due for countries like Brazil, Russia, China, India and Group of Seven Countries (G7) with Japan's due around $3-trillion and that of U.S. around $2.8-trillion. The forecast predicts that the yields through the ten-year bonds will be higher by year end for at least seven of the countries.
The survey states that as the global economy slows down and countries will struggle to finance increasing debts burdens, the investors will insist for higher compensation to lend to the countries. 4 percent growth is predicted this year by the International Monetary Fund (IMF) from the prior estimate of 4.5 percent as Europe's debt crisis spreads. China's property market is cooling down whereas U.S. is struggling hard to bring down the budget deficit exceeding $1 trillion.
Stuart Thomson, a Money Manager in Glasgow at Ignis Asset Management, which oversees $121 billion, said, "Rather than the start of the year being the problem, it's the middle part of the year that becomes the problem. That's when we see the slowdown in the global economy having its biggest impact."
In order to refinance, the amount required will be more than $8 trillion, including interest payments. The year after when Standard & Poor's rated U.S. to AA+ from AAA and put 15 European nations for downgrades, as the competition for buyers is burning up. Elwin de Groot, an Economist at Rabobank Nederland in Utrecht, Netherlands, part of the world's biggest agricultural lender, said, "It is a big number and obviously because many governments are still in a deficit situation the debt continues to accumulate and that's one of the biggest problems."
World's biggest debtors are facing financial problems to finance their debt in 2011; Bank of America Merrill Lynch's Global Sovereign Broad Market Plus Index gained 6.1 percent the most since 2008. Though targeted as $8.5 billion euros, Italy auctioned only 7 billion euros of debt. Data by Bloomberg shows that, for an economy that is sinking into 4th recession since 2001, Prime Minister Mario Monti's government must refinance about $428 billion of securities coming due this year, with another $70 billion in interest payments.
In a separate survey by Bloomberg, based on 10-year government bonds yielded by economists and strategists, the G 7 nation's borrowing costs rose as much as 39 percent in 2011. There is a little change in China's 10 year yield, while a fall has been witnessed in India from 8.39 percent to 8.02 percent. Russia and Brazil are excluded from the survey.
