European Debt Crisis

Explained: Bond Yields show how much interest a government needs to pay annually in order to borrow money. Here we show the yield as a percentage. When investors become fearful that a government may not pay them back, they often demand a higher interest rate, which can be seen in rising bond yields. Higher bond yields make it more expensive for governments to borrow and their debt harder to bear. A 10 year yield above 7% has triggered bailouts for Greece, Portugal, and Ireland.

Explained: The benchmark stock index can indicate the performance of stock markets in each country. Stock indexes tend to rise when investors have a positive outlook and wish to take on risk. They tend to fall when investors’ outlooks deteriorate. National debt fears tend to weigh on stocks, especially financial sector stocks.

Explained: The change in Gross Domestic Product is a commonly used indicator of economic activity in a country. Positive GDP growth can make it easier for a country to pay its debts, as it has more revenue to draw from. Negative GDP growth has the opposite effect.

Explained: This shows how large a country’s outstanding sovereign debt compares to its annual GDP. This number allows you to easily compare how sustainable debt is across very different countries and economies. The higher the amount of debt compared to the economy, the more of a country’s resources must go to paying down debt rather than other things such as investment or consumption.

Explained: A negative Budget Balance shows how much a government needs to borrow annually compared to that country’s GDP. Larger budget deficits require governments to mount up greater debts to continue running.

Explained: The number of people unemployed as a percentage of the labor force as measured by Eurostat. Higher unemployment can reduce government revenues from payroll taxes. Rising unemployment can also encourage political instability.