Since early 2009, analysts have worried that Greece might default on its debt. But The Economist warned last November:

The EU’s authorities, rightly or wrongly, are more afraid of the moral hazard of a bail-out than the possible spillover effect of a hypothetical Greek default to other eurozone countries. If faced with a choice between preserving the integrity of the stability pact and the integrity of Greece, they are currently minded to choose the former.

By last month, the International Monetary Fund had put together a loan package. Wall Street went into a tizzy yesterday; with the Dow dropping 1000 points before recovering most of that. Although about two-thirds of Greece’s public debt is held by foreigners, the gross external debt figure is relatively low, only $581.68 billion.

I thought that Wall Street’s reaction might have reflected a really bad debt-to-GDP ratio, but most stories aren’t naming numbers. Here’s what I’ve found, and why I’m asking “Why Greece?” It’s certainly not because of the magnitude of total external debt, as this list makes clear.

The following list shows external debt as a percent of gross domestic product. External debt is the “total public and private debt owed to nonresidents repayable in foreign currency, goods, or services.” Most of news reports have focused on public debt, if they have included any statistics.

  • Ireland: 1312%, gross external debt: $2.32 trillion
  • United Kingdom: 424.9%, gross external debt: $9.15 trillion
  • Switzerland: 382.2%, gross external debt: $1.21 trillion (2009 Q3)
  • Sweden: 264.3%, gross external debt: $881.5 billion
  • France: 248%, gross external debt: $5.23 trillion (2009 Q3)
  • Hong Kong: 223.1%, gross external debt: $672.9 billion
  • Japan: ~197%
  • Spain: 186.1%, gross external debt: $2.55 trillion (2009 Q3)
  • Germany: 182.5%, gross external debt: $5.13 trillion
  • Greece: 170.5%, gross external debt: $581.68 billion
  • Italy: 147.4%, gross external debt: $2.594 trillion (2009 Q3)
  • Australia: 124.3%, gross external debt: $1.025 trillion (2009 Q2)
  • United States: 96.5%, gross external debt: $13.77 trillion (2009 Q3)
    :: Combined U.S. and state debt projected at 94 percent in 2010

What these numbers don’t show is the percentage of that debt held by the government. They also don’t show savings rates, which some argue have made Japan’s levels less perilous. Note: the U.S. savings rate is among the developed world’s lowest.

This list begs a corollary question: “when will it be us?” Our debt-to-GDP percentage may be the lowest on this list, but in absolute debt levels, we’re number one debtor nation in the world by a factor of about 250%. Too big to fail?

Also, the IMF projected across-the-board increases in debt-to-GDP rates of 20 points this year, due to the US-led financial crisis

Finally, it’s important to distinguish between government deficits and debt. A deficit is a year-to-year shortfall in revenue relative to spending. Debt is the collective borrowing that results from repeated deficits. And part of the deficit package is the interest being paid on the debt. Check out the chart below from zFacts, which puts the U.S. federal debt into perspective.

US Debt from zFacts

Chart from zFacts

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KATHY GILL, Technology Policy Analyst
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