Greece's debt crisis has been making the headlines for the past few months, but while editorialized insights dominate the public, what do the hard numbers look like? After all, with fears that the debt contagion will spread to a handful of other European nations, it's only natural to wonder how close they compare financially to Greece. Today, we'll explore just that with a deeper look at the debt numbers. (For a background on the situation in Greece, see EU Economics? It's All Greek To Me.)

IN PICTURES: Break Into Forex In 12 Steps

Back to the Beginning
When it comes to Greece's debt numbers, a couple of the most telling metrics can be found at the start of it all. The Stability and Growth Pact, ratified in 1997, provides rules for EU member states' budgetary requirements. With a shared currency in the euro, the pact was devised as a way to ensure that less affluent countries couldn't harm larger economic powers like France and Germany, who suddenly found their financial fates intertwined with smaller eurozone states like Greece and Austria.

The pact was designed to prevent smaller nations from unhealthy deficit spending and borrowing. But the problem with the Stability and Growth Pact was with enforcement; nearly half of all EU member states have been in breach of the pact at some point.

What Happened?
With those warning signs, why is it that the Greek debt crisis has taken such a dramatic toll on stocks? A big part of it was financial wrangling on Greece's part to conceal the extent of its budget deficit, a move designed to protect the country from the bear market of 2008. So, what do the numbers look like right now? Historically, Greek government spending accounted for around 50% of GDP - versus around 35% even for debt-laden countries like the U.S. - a factor that has contributed to a budget deficit that rings in at 13.6% of GDP (the second highest in Europe).

When it comes to short-term volatility in the markets, the key word is debt. Right now, Greece has around $400 billion in public debt, 1.25 times more debt than the country's entire GDP. That's a stifling amount of borrowed cash to service, but what's more significant is when the debt is due. Around $74 billion worth of that debt (54 billion euros), a staggering chunk of the country's total bill, comes due in 2010. Essentially, if Greece can't come up with the cash to pay off its dole, either through additional borrowings or surplus funds, the country falls into default, a seriously bad situation for the euro.

Fortunately for the world's markets, that scenario was avoided over the weekend thanks to the activation of loans from the IMF that should carry Greece for the next three years, as well as a 500 billion euro bailout package for all member states approved by European finance ministers.

Comparing the Other Eurozone Credit Statements
But Greece is far from alone in its delicate financial predicament. Portugal, Italy, Ireland and Spain also stand out as states that could potentially see financial difficulties because of their high debt loads and large deficits. During the last week of April, when Standard & Poors downgraded Greece's long-term sovereign debt to junk status, it also knocked Portugal's bonds in a downgrade. That move had serious repercussions for the market - it was one of the first instances this year where another eurozone nation started showing cracks in its façade.

Fears Assuaged, For Now
Investors are still reticent to bet on American stocks that are heavily involved in the eurozone for fear that an additional slide in the currency will be seriously bad for companies that report their finances in dollars. But that said, the latest bailout packages provide a sort of safety net for any new EU states that start to show signs of financial trouble.

Knowing the reality of the numbers is giving confidence back to the market as a whole this week. We'll know soon whether that's a trend that should continue in 2010. (To learn more, see Greece: The Worst-Case Scenario.)

Feeling uninformed? Check out the financial news highlights in Water Cooler Finance: Greece Is Burning And Buffett's Under Fire.

Related Articles
  1. Investing

    Why Is Financial Literacy and Education so Important?

    Financial literacy is the confluence of financial, credit and debt knowledge that is necessary to make the financial decisions that are integral to our everyday lives.
  2. Stock Analysis

    The 5 Biggest Russian Oil Companies

    Discover the top Russian oil companies by production volume and find out more about their domestic and international business operations.
  3. Chart Advisor

    4 European Stocks to Consider Buying

    European companies, listed on US exchanges, that are providing buying opportunities right now.
  4. Professionals

    10 Must Watch Documentaries For Finance Professionals

    Find out about some of the best documentaries that finance professionals can watch to gain a better understanding of their industry.
  5. Stock Analysis

    Who Are Delta Airlines’ Main Competitors?

    Compare the top competitors of Delta Air Lines, Inc. Take a deeper look into the key drivers of competition in the airline industry.
  6. Investing

    Impact Investing Funds: What are the Risks?

    Impact investing funds can carry risks unique to this asset class, including political risk, currency risk and exit risk.
  7. Investing

    China's Top Trading Partners

    A slowdown in China, the largest trading nation in the world, will have significant impacts on major trading partners: the U.S., Hong Kong, and Japan.
  8. Markets

    Is Another Bear Market Ahead?

    With market volatility recently reaching its highest level, investors are questioning what the outlook is for U.S. stocks in 2015 and beyond.
  9. Stock Analysis

    Why Is GE Selling Some of Its Subsidiaries?

    Learn why GE is selling off a substantial amount so it does not have to comply with increased government regulation in the wake of the 2008 financial crisis.
  10. Chart Advisor

    Investors Moving Out Of Emerging And Frontier Markets

    Based on the charts of two key ETFs, it appears that investors are moving out of emerging and frontier markets in favor of greater stability.
  1. Do negative externalities affect financial markets?

    In economics, a negative externality happens when a decision maker does not pay all the costs for his actions. Economists ... Read Full Answer >>
  2. What is the difference between disposable and discretionary income?

    According to the Bureau of Economic Analysis, or BEA, disposable income is the amount of money an individual takes home after ... Read Full Answer >>
  3. What kinds of costs are included in Free on Board (FOB) shipping?

    Free on board (FOB) shipping is a trade term published by the International Chamber of Commerce or ICC, that indicates which ... Read Full Answer >>
  4. What are the major laws (acts) regulating financial institutions that were created ...

    Presidents George W. Bush and Barack Obama, in conjunction with Congress, signed into law several major legislative responses ... Read Full Answer >>
  5. What are the similarities and differences between the savings and loan (S&L) crisis ...

    The savings and loan crisis and the subprime mortgage crisis both began with banks creating new profit centers following ... Read Full Answer >>
  6. What are the differences between B-shares and H-shares traded on Chinese stock exchanges?

    Equity listings in China generally fall under three primary categories: A shares, B shares and H shares. B shares represent ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  2. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  3. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  4. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  5. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  6. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!