Sovereign debt fears trigger plunge in global markets


By Patrick O’Connor
WSWS.org
5 February 2010


Stock markets in the US, Europe and other regions plunged yesterday in response to growing fears over the size of sovereign debt in several countries. Greece is on the verge of national bankruptcy and international investors are sceptical about the government’s ability to implement the savage cuts to wages and social spending required to lower its deficit from 12.7 percent of gross domestic product to just 3 percent by 2012. Portugal and Spain face a similar situation.


Underlying the crisis in the eurozone is the question as to whether US capitalism can finance its mounting debts and remain solvent in the long term. On Wednesday, Moody’s Investors Service warned that America’s triple-A sovereign credit rating will soon come under pressure unless economic growth is higher than forecast, or the Obama administration moves to reduce the fiscal deficit by initiating new and deeper spending cuts. Moody’s warned that the current US debt trajectory was “clearly continuously upwardâ€