We all love a good league table – so here’s one from Rabobank economist Shahim Kamalodin.
No prizes for guessing which major industrialised economy is most vulnerable to a sovereign debt crisis, although interesting to see Japan, the US, Belgium and France all sitting above the UK, Spain and Ireland.
Time for some new acronyms, perhaps.
Kamalodin’s index is derived from eight indicators:
He says the first two indicators broadly capture the amount of the pain a government needs to go through in order to guarantee debt sustainability.
The third variable measures the affordability of public debt, while the fourth and fifth variables measure its financeability. The sixth and seventh variables, meanwhile, measure the country’s dependence on foreign investors.
As for that “corruption perception index,”it is…
…considered a proxy for the government’s credibility, ability and willingness in carrying out the needed austerity measures (instead of manipulating its official statistics, for example).
Which leads us to this interesting Rabobank chart – click to get a better view.
Essentially, that is telling us that while Japan ranks high up the sovereign vulnerability index because of the amount of debt it needs to roll over and the US is up there because of its large structural deficit, Italy is substantially in the frame because of its poor perception on the corruption front.
Is that fair, or simply national stereotyping?
Lots more on this in the usual place.
Related links:
The dynamics of sovereign debt – Felix Salmon
Reflections on the Sovereign Debt Crisis – Edward Chancellor