Sovereign Debt Crisis Hard Hits the Globe

May 24, 2010 - PRLog -- Sovereign debt crisis is hard hitting countries across the globe. After the fiscal deficit in the year 2008 there were expectations that the economic crisis will come to an end but the condition is still prevailing. Even today many countries are facing a severe financial crisis leading to severe downfall of the GDP and economic progress.

There are many factors that are contributing to the increasing debt crisis. Some of the key factors are flexible currency exchange rates, outright defaults, and macroeconomic misalignments. Furthermore, short-term maturities of external or domestic debt obligations are also contributing to debt crisis.

In the early years countries like Russia, Argentina, and Pakistan faced a severe debt crisis due to outright defaults on domestic or external debts.  There are many investors who show their unwillingness to roll over short-term liabilities that eventually pushes a country on the verge of crisis.

Today Europe is in the clutches of economic crisis. Greece has started showing signs of debt which has eventually given dark signals to countries like Portugal, Ireland and Spain. All these countries are hugely indebted and far apart their own distinctive history of financial turmoil and crisis is not hidden from anyone. The basic problem arises from the fact that these developed nations are unable to redeem bond holders because of a heavy fall in the prices of government bonds with exceptional rise in the interest rates. Apart from these stock market and shares have also fallen drastically bringing in a new storm of calamity all these countries.

Now, it is believed that the sovereign debt crisis is heading towards Japan. According to known research and reports it is said in the coming three to four years, Japan will also experience a hard hit by the crisis. There are chances that the interest rates will surge depending on the expenditure made by the big companies and the government. It is also said the corporate sector of Japan has got enough savings to balance the dwindling public fiscal and household savings. But there are possibilities that over a period of time the corporate world will use more of the savings for betterment which will eventually make it difficult to maintain the economic balance.

A well-known research states that about 95% of the Japanese government bonds are owned by domestic investors which may prove to be fruitful under economic crisis but 5% of the foreign investors may stimulate turmoil. With all this there is not much room for the government of Japan to cut expenditure but still the government is making hard efforts to face the country o the hard hit of sovereign debt crisis. There are no clues as to how successful will government be in saving the country but it’s sure that debt crisis has started marching towards Japan.

With this many other countries across the globe are worrying about the future and are making stern efforts to get through it. After the hard hit of economic downfall in 2008, this hit has shaken the entire globe.

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Jennie Gandhi has a passion for writing and writes on diverse topics including fashion, beauty, automotive, educational, motivational and even technical. Read more about Sovereign Debt Crisis on http://www.sovereigndebtcrisis.net