Europe
European sovereign debts are at levels high enough to give recurrent panic attacks to the markets. The European nations' debt crisis is serious due to a fundamental flaw in the formation of the European Union (EU). The EU is a political and currency union while on the fiscal side the countries remain separate. Among member countries, there are countries such as Germany who have current account surpluses and strong economies while on the other hand there are Portugal, Ireland, Italy, Greece, and Spain with a huge debt burden created due to their ability to borrow at low cost as a member of the EU and liberal spending policies.
Unlike the US, the risk of a sovereign default is high in the Euro countries. A country that has its own currency is not really in the risk bracket of a sovereign default. In the Euro zone, countries cannot 'print ' their own money. Their debt is nominated in Euros, which is equivalent to a foreign currency. Thus, to repay a sovereign debt it has to be remitted in a foreign currency - Euro - and cannot be absorbed by domestic central bank operations. If a member nation had a current account surplus, the influx of Euros could have been used for the debt repayment easily. Unfortunately, many countries are running deficits both in current and capital accounts.
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