ASSESSING THE RISK THAT GREECES WOES HERALD SOMETHING FAR WORSE

Feb 18th 2010 | WASHINGTON, DC | From the Economist print edition HOW far is it from Athens to America and which countries lie on the way? That may sound like an esoteric geography question, but it is being asked by investors as Greeces debt crisis creates global jitters about the safety of sovereign debt. So far Portugal, Ireland and Spain, the other high-deficit countries on the periphery of the euro zone, are thought to be next in line. In most big rich economies, yields have been stable and well below their longterm average (see chart). But nerves are fraying elsewhere. The cost of insuring against sovereign default has risen in 47 of the 50 countries for which these instruments exist. Dubais sovereign creditdefault-swap spreads soared to their highest level in a year this week, amid concern about the terms of a debt restructuring by a state-owned conglomerate. There is increasingly shrill commentary arguing that Greece is the start of a far bigger problem. A Greek crisis is coming to America, blared the headline on a recent Financial Times article by Niall Ferguson, a financial historian. The stakes are high. A sudden loss of confidence in all sovereign debt, and especially in American Treasuries, the worlds benchmark risk-free asset, would have calamitous consequences in a still-fragile recovery. Equally, an exaggerated fear of sovereign risk could prompt governments into premature fiscal austerity, which might itself push the world economy back into recession. Neither the shrill nor the sanguine arguments can be dismissed out of hand. Fiscal pessimists point both to past experience and to the arithmetic of public debt for evidence that sovereign-debt crises could spread far beyond Greece. The lesson of history, as documented in a magisterial study of financial crises by Carmen Reinhart and Ken Rogoff, is that public debt tends to soar after financial crises, rising by an average of 86% in real terms. Sovereign defaults have often followed. The arithmetic argument for pessimism is equally compelling. Virtually no rich country has a sustainable debt position, in the narrow sense that none is running a tight enough budget or is growing quickly enough to stop its debt burden from rising. The worst offenders on this count are the euro areas peripheral economies, as well as Britain and America. Greece stands out for the size of its debt stock, the scale of its budget deficit and the grimness of its growth prospects given high domestic costs and an inability to devalue. Worries about where growth will come from are the main reason why fears have, so far, focused on the other weak members of the euro zone (although Spain attracted decent demand for a 15-year bond sale on February 17th).

America and Britain, having their own currencies, are in a different position. But they are not immune to concerns about growth and debt dynamics. On February 18th Britain reported a deficit for January, a month of surplus since records began in 1993. Pessimists also fret about the sheer scale of Americas public borrowing and, especially, Chinas role in funding it. News that foreign demand for Treasuries fell sharply in December and that Beijing was a big seller has fanned their concerns. Nonsense, says the sanguine camp, whose members include Paul Krugman, a prominent New York Times columnist. In their view, those who fear a sudden rise in sovereign risk, particularly for America, misunderstand the reasons for the build-up of sovereign debt and underestimate the role of Treasuries as a safe haven. Sovereign-bond yields are low because private demand for capital is weak. And it is likely to stay that way as Anglo-Saxon households rebuild their savings and firms hold back from investing.

TRADUCCION:
Los inversores como la crisis de deuda de Grecia crea nerviosismo mundial sobre la seguridad de la deuda. Portugal, Irlanda y Espaa establece grandes rendimientos. Pero los nervios se estn debilitando en otros lugares. El costo del seguro contra cesacin de pagos ha aumentado en 47 de los 50 pases para los cuales existen estos instrumentos. Soberanos de Dubai de crdito-default swap spreads-se elev a su nivel ms alto en un ao esta semana, en medio de preocupaciones acerca de los trminos de una reestructuracin de la deuda por un conglomerado de propiedad estatal. Grecia es el comienzo de un problema mucho ms grande. Una crisis griega est llegando a Amrica. Hay mucho en juego. Una prdida repentina de confianza en toda la deuda soberana, especialmente en los bonos del Tesoro estadounidense, el mundo de referencia "libre de riesgos" de activos, tendra consecuencias desastrosas en una recuperacin todava frgil. Igualmente, un miedo exagerado del riesgo soberano podra impulsar a los gobiernos en la austeridad fiscal prematura, lo que podra impulsarse la economa mundial en recesin.

Fiscales pesimistas apuntan tanto a la experiencia pasada y la media aritmtica de la deuda pblica para la evidencia de que la crisis de deuda soberana podra extenderse mucho ms all de Grecia. La leccin de la historia, tal como se documenta en un magistral estudio de las crisis financieras por Carmen Reinhart y Rogoff Ken, es que la deuda pblica tiende a elevarse despus de las crisis financieras, aumentando en un promedio de 86% en trminos reales. Incumplimientos soberanos han seguido con frecuencia.

Ningn pas rico tiene un sustento ya que no se est ejecutando un presupuesto lo suficientemente fuerte o est creciendo lo suficientemente rpido como para detener la carga de su deuda se eleve. Los peores infractores en este conteo son las economas perifricas de la zona del euro, as como Gran Bretaa y Estados Unidos. Grecia se destaca por el tamao de la deuda, la magnitud presupuestario EEUU y Gran Bretaa, que tiene sus propias monedas, se encuentran en una posicin diferente. Pero no son inmunes a las preocupaciones sobre la dinmica del crecimiento y la deuda. El 18 de febrero Gran Bretaa registr un dficit de enero, un mes de supervit desde que comenzaron los registros en 1993. Los pesimistas tambin se preocupan por la magnitud del endeudamiento pblico de los Estados Unidos y, especialmente, el papel de China en la financiacin de la misma. La

noticia de que la demanda extranjera de bonos del Tesoro cayeron fuertemente en diciembre, y Beijing, que fue un xito de ventas ha avivado sus preocupaciones.

Bibliografa: http://www.ejerciciodeingles.com/entender-articulo-analisis-financiero-ingles/