Here is a table from my friends at Variant Perception in London, from data from The Economist. Notice that France is over 8%. Germany is almost 6%. Wow.
I reproduced graphs that projected interest-rate payments as a percentage of GDP rising rather dramatically over the next 30 years, to levels that, quite frankly, cannot be tolerated by the markets. Long before we get to the place where we in the US are paying 20% of our GDP in interest (which would be about 80% of our tax collections, even with much higher tax rates) the bond market, not to mention taxpayers, will revolt.
... the current course is not sustainable. And to get back to a level of debt-to-GDP that countries “enjoyed” as recently as 2007 requires such massive structural surpluses as to boggle the mind. And that is with rather optimistic growth assumptions that... are not very likely.
You can read last week’s letter at http://www.2000wave.com/article.asp?id=mwo043010. The discussion of the BIX paper is in the last half of the letter.
Now, we come to the section where they talk about the risks associated with the fiscal deficits. And by the way, we should note that 25 of 27 European countries are running deficits in excess of 3% of GDP. Ireland has a deficit of 14.3%. Portugal is at almost 10%. Greece is almost 14%.