Author Robert J. Samuelson, in a report published by the Washington Post, said that the United States and economies around the world are in a critical situation, yet we still underestimate the grave repercussions that threaten the entire world.
Indeed, a second crisis looming on the horizon is a global debt crisis centered in Europe that would further destabilize a world that is still suffering from the dire consequences of the Corona pandemic.
In the United States and other countries, tens of millions have lost their jobs, total trade losses amounted to trillions of dollars, and there is no doubt that the world will face another debt crisis that will deepen and prolong the worst economic recession since the Great Depression of the thirties of the last century.
Between 2010 and 2012, Europe faced for the first time a “European sovereign debt crisis”, and the weakest countries in the European Union (Greece, Italy, Portugal, Spain, and Ireland) were struggling to avoid defaulting on their massive government debt, a task that was made more difficult by the annual budget deficit.
Deep recession
Like the United States, most European countries have now entered into a deep recession, and the GDP of the German economy is set to shrink by 8%, the French by 10%, the Spanish by 15%, the Italian by 18% and the Greek by 15%, while it declined Consumer confidence and the budget deficit widened, according to a new study from Capital Economics.
The writer explained that the budget deficit refers to the annual gap between government spending and revenue, and government debt is the cumulative total of the previous deficit, and the deficit and debt have increased significantly in Europe, as is the case in the United States.
In 2019, Germany's budget surplus was equivalent to 1% of GDP, but in 2020 it will post a deficit of 8% of GDP, according to the Capital Economics study.
France's deficit is expected to rise from 3% of GDP in 2019 to 10% this year, and Italy will see a deficit of 15% of GDP, registering an increase of 1.6% compared to 2019.
The writer stated that the combination of a contraction of the economy and a growing deficit automatically leads to an increase in the debt burden, which was previously high and is still on the rise.
According to Capital Economics, Germany's debt for 2020 is estimated at 73% of GDP, 120% for France, 180% for Italy and 222% for Greece.
It is not known whether this situation will remain permanent, as for most economists this situation and debt will remain so long as the market - investors and traders - continues to lend voluntarily, and it is assumed that the outstanding debt can be converted into new debt.
Italy's debt is
based on several factors, including low interest rates, past loan repayment records, and low inflation. Some countries can borrow more than others.
Despite the high debt rate in Germany, no one believes that it may default on its debts, while Italy and Greece have become closer to the brink.
If the bailout is not put in place, Italy may be forced out of the eurozone to lease with it some other heavily indebted countries, knowing that Italy has the third largest economy in the eurozone (19 countries that use the euro as a currency), after Germany and France, noting That the stakes are high.
According to economist Desmond Lachman, of the American Project Policy Research Institute, organizing a bailout is not easy, because the amount of money will be huge and because the decision by the German Constitutional Court recently may prevent Germany from participating in it, and without Germany, the largest economy in Europe, other countries may fail to provide assistance.