The numbers look like this : Greece first , has $360 billion GDP , $350 Bn of which is Public Debt, Total Debt is $485 billion. All reference data is CIA Factbook, plus hints from indexmundi.com) Similarly, the others , namely Spain, Ireland and Italy have a GDP of approx $1.44 trillion, Public Debt of $860 billion and total debt of $2.3T. Portugal, similar to Greece has a $350bn GDP , a $240bn public Debt and total debt in the Economy of $485 billion. Each of these countries has a high per capita income of $30000 and over, and the consumer debt pile is waiting for complete foreclosures and write off in each case.
Each of these nations had wiped off debt from their balance sheets in early 2009 and are back, exposed and looking for a dole. Together that is $8 T of which the public debt is around $3T and like in Greece ‘s case, 70% of this Euro 260bn debt for Portugal is probably with external investors that cannot roll over the debt. As of now, Spain has promised to reduce the current debt by 30% in the 2010 budget.
The Euro is affected, but not likely that it will turn its trend. this is because Euro Bonds are higher than sovereign bonds in each government and given their situation, none of them is holding or issuing much of Euro debt in each case. The bankers issuing national debt for these would be European desks of the Big $ and Deutsche Bank and HSBC and they would be arranging much like any other municipal debt or even junk debt tranches often as unemployment rates have been in nearer to 20%. None of them would be vouching for the European Central Bank to wipe out or guarantee this debt.
The LTCM hole was comparably less than 25% of that debt and once debt is written off in the worse case and the economies pegged again to the ERM2 at a new rate for a new currency, it would be simple for them to chart a recovery without affecting the Euro zone. Their overall national product (GDP) of $4T is not comparable to UK, Germany and France which are $2.4T, $3T and $2.2T for each thus the Euro zone as a whole seems to be capable of saving the bill.
However, if they do decide to share rescue mechanisms, esp as there may not be a light at the end of the tunnel for each of them either, the tailspin will become uncontrollable. It is debatable at this point but I would believe the Euro mechanism can simply be unplugged and redenominated in such an eventuality. Of course self-interest and politics would serve each differently and Euro on its own and its Euro Bonds are not substitutable by or for the national debt for any of the members or non-members.
Any Latin American example of the 80s and 90s would have probably 2-3 times more inter-relationships with the US economy than any of these member states. The Commercial Real Estate tranche just coming due in 2010 is over Euro 400 billion or $3T overall and that is up next.