As eurozone economy shrinks, govt debt loads grow

Europe’s government-debt crisis is no longer panicking financial markets. But it won’t end until the region’s economy starts growing strongly again.

And that will be a while. The economy of the 17 countries that use the euro has shrunk for two straight quarters — a common definition of a recession — and analysts forecast little or no growth until 2014.

Without growth, there won’t be enough tax revenue to help countries like Greece, Italy, Spain and Portugal narrow their deficits and slow the expansion of their debts. Their debt burdens as a percentage of economic output, a key measure of fiscal health, look worse by the day.

The eurozone’s combined debts are equal to about 93 percent of the region’s gross domestic product this year and that figure is forecast to rise to peak at 94.5 percent next year. In 2009, the eurozone’s debt-to-GDP ratio was 80 percent. A ratio above 90 percent is generally considered high and can put pressure on governments’ borrowing costs.

See on http://news.yahoo.com/eurozone-economy-shrinks-govt-debt-loads-grow-074105219–finance.html

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