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World Organization of Creditors: The Debt Bubble Is About To Burst

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WOC mapThe house of cards of the world economies continues to collapse. The problems of Greece and Cyprus are just the beginning of a global trend. Public debt may soon flatten everything in its path like a huge snowball.

 State debts are continuing to grow and, according to the latest estimates, it is becoming more and more difficult for countries not only to decrease the debt, but even to stabilize it. The preliminary results for 2012 show that the total debt of all countries has exceeded $55 trillion. The largest part (75%) is accounted for by only seven developed economies, the G7 countries. During the previous year they not only failed to improve the situation, but increased their debts by 5%. The total indebtedness of developed countries has grown by 12%, or 110% of total GDP.

The situation is not as critical in developing countries: During 2012, the total public debt grew by 1%, or 34% of GDP. The greatest increase was in the countries of the Middle East and Northern Africa, where public debts increased by 5%. In other regions the increase was 1-2% of the previous year’s level.

Public debt of key regions

Region

 Public debt, billion US dollars, 2012

Public debt, billion US dollars, 2012

Change

Debt-to-GDP ratio 2012

Developed countries

46,539

41,715

12%

110%

G7

42,261

40,398

5%

129%

European Union

14,316

14,458

-1%

89%

Developing countries

9,329

9,234

1%

34%

Asia

4,114

4,017

2%

32%

Latin America and the Caribbean Islands

2,812

2,817

0%

49%

The Middle East and Northern Africa

798

757

5%

27%

Commonwealth of Independent States

362

357

1%

14%

Sources:WOC, IMF, CIA

 

Debt Leaders Are Still the Same

No substantial changes have occurred in the leaders with respect to public debt. The first two places in the rating are held by the USA and Japan, with $16 and $14 trillion, respectively. Thus more than a half of the world sovereign debt is accounted for by two countries. They are followed by countries the public debt of which is $1-3 trillion. After Japan, where government liabilities are almost three times domestic GDP, the hardest situation is in Italy. At the end of 2012, Italy’s sovereign debt to GDP ratio was 126%. However, some experts note that the situation there is more stable than that of its Southern European neighbors, since the government bonds have long maturities and are owned mostly by domestic investors.

The largest percentage-based increase of the public debt among the countries studied was in Kazakhstan, where the debt increased by more than a third (+32%), moving that country to 58th place in volume of public debt. The greatest increase in financial liabilities among developed countries was in Spain and Australia, with indebtedness growing by 23% and 19%, respectively, in 2012.

China is continuing to reduce its public debt, although very slowly. At the end of 2012, its indebtedness had decreased by 6% over the previous year, while the government had paid off another 5% of its liabilities. The public debt of Greece also decreased by 8%, which can be explained by the fact that the creditors wrote it down in 2012. Hungary’s financial liabilities decreased by 15%, giving it 42nd place in the general rating.

Rating of countries by size of public debt

Place in 2012

Place in 2011

Country

Public debt, billion US dollars, 2012

Public debt, billion US dollars, 2011

Change

Debt-to-GDP ratio 2012

1

1

USA

16,730.5

15,536.3

8%

107%

2

2

Japan

14,148.9

13,476.9

5%

237%

3

3

Germany

2,888.7

2,881.5

0.3%

83%

4

4

Italy

2,611.2

2,640.7

-1%

126%

5

5

France

2,440.0

2,387.9

2%

90%

6

6

Great Britain

2,175.1

1,977.4

10%

89%

7

7

China

1,770.9

1,886.1

-6%

22%

8

9

Canada

1,579.3

1,483.8

6%

88%

9

8

Brazil

1,569.7

1,619.0

-3%

64%

10

11

Spain

1,267.7

1,032.3

23%

91%

11

10

India

1,202.6

1,123.0

7%

68%

12

12

Netherlands

547.0

547.6

-0.1%

68%

13

13

Mexico

520.3

506.3

3%

43%

14

14

Belgium

492.0

502.1

-2%

99%

15

15

Greece

462.9

501.3

-8%

171%

26

25

Russia

222.9

221.3

1%

11%

Sources:WOC, IMF, CIA

 

Everyone Shares the Debt

Japan is still at the top of the list in public debt per capita: 1more than $110,000 for every resident. The consequences of the tsunami and the Fukushima nuclear power plant accident will have a negative impact on the economy of the Land of the Rising Sun for a rather long time to come. Japan is followed by Ireland ($53,900 per resident), and Singapore and the United States have practically caught up with it. In these countries, the debt per capita is $53,000. At the same time, the pressure on residents of Qatar has considerably increased: Every resident accounts for more than $37,000, which is 19% more than last year.

In Russia as a whole, the public debt is stable. At the end of 2012, it had increased by 1% year-on-year, and does not exceed 11% of GDP. The indebtedness per capita is a little more than $1,500.

Rating by public debt per capita

Place

Country

Public debt per  resident, US dollars, 2012

Public debt per  resident, US dollars, 2011

Change

1

Japan

11,0875.1

105,373.8

5.2%

2

Ireland

53,992.8

50,585.1

6.7%

3

Singapore

53,435.9

52,994.6

0.8%

4

USA

53,229.0

49,804.4

6.9%

5

Norway

49,438.7

48,246.3

2.5%

6

Canada

45,347.6

43,086.6

5.2%

7

Belgium

44,549.8

45,854.0

-2.8%

8

Italy

42,879.6

43,557.5

-1.6%

9

Greece

41,313.1

44,783.4

-7.7%

10

France

38,474.8

37,827.0

1.7%

11

Qatar

37,506.5

31,793.9

18%

12

Switzerland

36,240.8

37,446.2

-3.2%

13

Austria

36,035.6

35,992.4

0.1%

14

Germany

35,323.3

35,234.9

0.3%

15

Great Britain

34,490.5

31,565.3

9.3%

47

Russia

1,570.8

1,554.1

1.1%

51

China

1308.1

1399.8

-6.6%

Sources:WOC, IMF, CIA

 

Reserves Won’t Save Us

When it comes to international reserves, China can boast the most impressive “safety cushion.” During the last year the country has increased its currency reserves to $3.5 trillion, which is three times the public debt. Second place is held by Japan, with $1.3 trillion, although that is enough to cover only 10% of the public debt. Third place was firmly gained by Saudi Arabia, which continues increasing its reserves. Russia, which is rated fourth, could soon be “pushed out” by the USA, which is continuing to increase its reserve funds. Nevertheless, it should be noted that in case of emergency, most countries won’t have enough in their “piggy banks” to cover all their debts.

Pessimism Is Becoming Reality

Considering the steadily growing pressure, more and more often we hear forecasts of the upcoming bursting of “debt bubbles.” The countries that are pressured by debt can’t find a way to pay their obligations and are being forced to borrow even more money to pay interest on their current loans. For both the majority of developed economies and countries where the debt-to-GDP ratio exceeds 60-70%, it looks like the point of no return has already been passed. Sooner or later they will share the fate of Greece and Cyprus. But in this case, there will be no one to borrow the “rescue” money from.

However, based on the predicted growth of public debt compared to GDP, some reduction of this figure is expected in the second half of this decade. But the optimists of the IMF are still betting on increased GDP, instead of the real reduction of public indebtedness.

Experts are increasingly tending towards the worst case scenario, stating that soon we are likely to observe a crisis of state finances, the extent and consequences of which will far surpass the financial crises of previous years.

Full report > Public Debt Research WOC June 2013

ENGLISH

MEP Vasile Blaga: The crisis in Afghanistan, especially in its social dimension, must have a firm response from the EU

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© Vasile Blaga/Facebook

MEP Vasile Blaga (PNL, EPP) argues that the current crisis in Afghanistan must be a priority on the agenda of the European institutions, which have resumed their work after the summer break.

In a statement for CaleaEuropeană, MEP Vasile Blaga said that the crisis in Afghanistan, especially in its social dimension, “must have a clear and firm response from the European Union.”

“The European Parliament has put the crisis in Afghanistan on its agenda this session. I expect that all the debates on the situation in Afghanistan will lead to solutions to the serious humanitarian situation that is about to unfold in Afghanistan. The EU, but also the Member States, owe a debt of gratitude to Afghan citizens who suddenly see their security and that of their families threatened”, added the EPP MEP.

The European Union this week began discussing the implications of recent events in Afghanistan for security and migration within the 27-nation Union.

The Foreign Affairs Committee, Development Committee and Parliament’s Delegation for relations with Afghanistan will hear from Gunnar Wiegand, Managing Director for Asia and the Pacific at the European External Action Service, who will present an assessment of the latest developments in Afghanistan. European Commission representatives are also expected to address MEPs.

Afghanistan has been rocked by deadly violence and a brutal terror attack against Kabul airport over the past few days, in the midst of U.S. and international troops evacuating from the country by 31 August.

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MEP Vasile Blaga: EU response to future health crises and progress of national recovery and resilience plans, important issues on EP agenda

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MEP Vasile Blaga  (EPP) argues that the September plenary session of the European Parliament should debate as a priority the EU’s instruments in the face of health and humanitarian crises, as well as the progress of National Recovery and Resilience Plans.

According to the MEP, the European Parliament is putting on the agenda extremely important issues for the future of the Union.

„I believe that an EU response to the effects of the COVID 19 pandemic is vital. The future of the Union must find us prepared for potential health threats similar to the coronavirus pandemic. We can all see that a health emergency of the scale of the present one can only be managed by joint measures taken by all Member States. This unfortunate experience of the last two years has shown us the fragility of the EU in the face of external health threats. We need to learn from this so that the negative social and economic effects will not be repeated in the future”, said Vasile Blaga in a statement to CaleaEuropeană.

A second priority, says the EPP MEP, is linked to an accelerated recovery of the EU economies: “National recovery and resilience plans must be urgently adjusted and approved so that investment policies become engines of development in each Member State and, as a whole, kick-start the EU economy as a whole. The European Parliament must closely follow, also during this session, the progress of the national recovery plans and the way each Member State spends the money allocated by the NRRP to achieve the objectives listed in the Recovery and Resilience Facility”, added Vasile Blaga.

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ENGLISH

After working on infrastructure projects for NASA and the British Air Force F-35 aircraft, Lagan Aviation & Infrastructure will modernize Campia Turzii Air Base, together with the consortium represented by Leviatan Design

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©️ Forțele Aeriene Române

The British company Lagan Aviation & Infrastructure, with extensive experience in the field of infrastructure and logistics projects of the British Royal Air Force and with collaborations at NASA level, will participate as a subcontractor in the infrastructure project in the operational area of the air base at Câmpia Turzii, according to the announcement on the public procurement platform SICAP.

The British company Lagan Aviation & Infrastructure, with extensive experience in the field of infrastructure and logistics projects of the British Royal Air Force and with collaborations at NASA level, will participate as a subcontractor in the infrastructure project in the operational area of the air base at Câmpia Turzii, according to the announcement on the public procurement platform SICAP.

The tender for the first phase of the project, worth 514 million lei, on “Realization of infrastructure – operational area in barracks 1833 Câmpia Turzii” was won by the joint venture Telekom Romania Communications SA – Ubitech Construcții SRL – Petrodesign SA and Leviatan Design SRL, as leader of this partnership.

“Our consortium has the necessary experience, both from a national perspective, through similar specific projects it has carried out, and from an international perspective, through the partners we collaborate with”, said Cătălin Podaru, director of Leviatan Design, the company that participated in the pre-feasibility study for the multi-roller infrastructure at Câmpia Turzii.

Among the key international partners involved in the Câmpia Turzii project is Lagan Aviation & Infrastructure, part of the Lagan Construction Group Ltd, established in 1962. The Brits build infrastructure to the highest safety standards for Romania’s most important strategic-military partners: Among the most recent major British-managed projects are aviation projects at Dublin Airport and RAF Marham, an important strategic base for the British Royal Air Force, for the operation of F35 multi-role aircraft. The contract to upgrade infrastructure and facilities at RAF Marham is worth £135 million.

Recently, the company has successfully delivered projects at Heathrow, London City Airport, RAF Akrotiri and RAF Gibraltar. In recent years, the company has also executed a £23 million runway resurfacing contract at RAF Northolt.

The group also has a specialist US airport team based in Virginia, Washington DC, currently working at Ronald Reagan National Airport and the Wallops Flight Facility for NASA.

This company’s expertise in infrastructure projects for F-16 aircraft is important for defence projects at Câmpia Turzii, as the Romanian base hosts F-16 aircraft of the Romanian and allied air forces, as well as American MQ-9 Reaper drones.

The Campia Turzii Air Base is one of the key strategic points in Romania’s defence and security infrastructure, being treated as such even by allies. In May this year, the US Air Force announced that the United States will invest $152 million in 15 infrastructure upgrades at Romania’s Câmpia Turzii Air Base.

The first works have already started in May-August 2021. The US Air Force plans to spend $130 million this year on “mission optimisation” at the Romanian air base. This amount is reflected in the Department of Defense budget for this year and represents the largest US military investment in Europe for 2021.

Other new modernisation projects are due to start at the end of 2021.

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