Moody’s, the international financial ratings agency, has provided an interesting international comparison of financial misery (as reported by and LA Times).  The misery index is a metric which adds a country’s fiscal deficit to the unemployment rate, which Moody’s suggests highlights the financial hole that a country finds itself in and its attractiveness to sovereign debt issuers.  Their analysis suggests that sovereign debt has the potential to create the next ‘subprime’ crisis in the coming year as some countries edge towards defaulting on their debt payments.  Countries such as Spain, Greece, Ukraine, Austria, Latvia and Mexico are seen at risk of defaulting due to their Debt to GNP ratio.   Ireland’s debt to GNP ratio in Dec 2008 was 32.5% (up from 23.3% in 2007), still quite a way short of the 60% threshold where defaulting becomes more likely (I couldn’t find a 2009 figure), but the fact that it’s on the rise means that it’s perceived as a risky investment, pushing up the cost to the government of borrowing money.  If one was to follow Fintan O’Toole’s diagnosis of the Irish crisis it would be interesting to explore how many of these nations are ‘democratically immature’.

Rob Kitchin