ML-Implode News - Greek problems mask the rising risks in Italy and France

Italy and France face mounting problems of high debt, slow growth, unemployment, poor public finances, lack of competitiveness and an inability to undertake necessary adjustments. Reductions in energy prices combined with low borrowing costs and a weaker euro, engineered by the European Central Bank, cannot hide deep-seated and unresolved problems forever.
Italian total real economy debt (government, household and business) is about 259 per cent of gross domestic product, up 55 per cent since 2007. France's equivalent debt is about 280 per cent of GDP, up 66 per cent since 2007. This ignores unfunded pension and healthcare obligations as well as contingent commitments to eurozone bailouts.
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France and Italy may not be able to avoid a financial crisis. Real GDP would need to increase at more than twice projected rates to stabilise and then reduce government debt-to-GDP ratios.

Alternatively, deep reductions in fiscal deficits would be required to start deleveraging. The necessary fiscal adjustment of about 2 per cent of GDP would be self-defeating, creating a familiar cycle of lower growth, rising budget deficits and higher borrowings.

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Greek problems mask the rising risks in Italy and France