Heather Stewart - Beyond Greece, the world is filled with debt crises
Drama in Athens reflects a bigger truth: precarious
countries across the globe owe trillions of dollars to lenders and investors
who must be repaid
With its shuttered banks, furious public protests and
iconoclastic politicians, the plight of Greece, brought to its knees
by a crippling debt burden, has been gripping and heartbreaking in equal
measure: a full-blown sovereign debt crisis on the doorstep of some of the
wealthiest countries in the world.
Yet new analysis by the Jubilee Debt Campaign reveals that
Greece’s plight is far from unique: more than 20 other countries are also
wrestling with their own debt crises. Many more, from Senegal to Laos, lie in a
debt danger zone, where an economic downturn or a sudden jump in interest rates
on world debt markets could lead to disaster.
One of the lessons from the 2008 crash was that hefty debt
levels can leave countries vulnerable to sudden shifts in market mood. But
Jubilee reports that the rock-bottom interest rates across major economies,
which have been a key response to the crisis, have in many cases prompted
governments, firms and consumers to go on a fresh borrowing binge, storing up
potential problems for the future.
Judith Tyson of the Overseas Development Institute thinktank
says the flipside of the latest round of borrowing has been investors and
lenders in the west looking for bigger returns than they could get at home, a
process known in the markets as a “search for yield”.
“Since 2012, there’s been a huge increase in sovereign debt,
in Africa in
particular,” she says. Some of the countries involved were beneficiaries of the
debt relief programme that G8 leaders signed up to at the Gleneagles summit in
2005. “They were given debt relief with the idea that it would give a clean
slate to go forward,” Tyson says.
She warns that a number of countries have since “loaded up”
on debt – and while some governments had invested the money wisely,
diversifying their economies and improving infrastructure, others have not. She
points to Ghana, in west Africa, where a sharp increase in borrowing has been
spent on what she calls “pork-barrel politics. They’ve spent it in a frivolous
way.” Read more:
