When it comes to keeping a healthy balance sheet, the countries with the largest debt in the world seem to be doing just about everything wrong. Yet despite the fact that most people would agree with this statement, the countries in question do not seem very concerned about their financial situations. The reason for this can be reduced to a very simple factor: countries cannot be forced to pay their debt. Of course there are always consequences for not meeting debt obligations, yet these are far more drastic for businesses and households than for sovereign states.
In addition to being able to resist prosecution and seizure of wealth, governments can raise additional funds by increasing taxes. Businesses on the other hand must find a way to boost sales, meaning they have no reliable source of income in case of an emergency. Thus, if the countries with the largest debt are ever on the verge of failing to pay, they can always resort to their citizens for help. Hence, states are not only far more protected from their creditors than businesses, but they also have very unique tools at their disposal.
So what leads these nations to take on such debt burdens in the first place? Well considering most states try to implement as many policies as possible, it comes as no surprise that cash is usually scarce. Hence, it is not only difficult, but also unwise, to finance large infrastructure projects without incurring debt. Thus, the ten countries with the largest debt are not necessarily irresponsible, but actually quite smart when it comes to doing business.
Although it seems these nations could certainly benefit from reading some of the best finance blogs, which we listed in a previous article, their economic progress suggests otherwise. Contrary to popular belief, indebtedness and poverty are not linked, meaning advanced economies can and do form part of the list of the countries with the largest external debt. If you are curious to know more about the nations in question, then the following list will provide some very helpful answers.
10. Spain – $2.3 trillion
It is no secret that Spain has been dealing with a very complex economic situation over the past few years. As it was one of the countries most affected by the financial crisis of 2008, extracting additional funds from the population has proven difficult.
As much money as $2.3 trillion is, of countries with the largest debt, Spain is in trillions of dollars-worth of better shape than some of the upcoming countries. Check them out on the next pages.
9. Netherlands – $2.52 trillion
Despite the fact that the Netherlands is one of the most advanced countries in the world, they can’t seem to shake their debt obligations, which currently constitute a whopping 344% of GDP.
8. Italy – $2.65 trillion
Like Spain, Italy also took a very hard hit when the market collapsed in 2008, and the European Union began to tremble. Too much spending and not enough reserves is never a recipe for success.
7. Japan – $2.86 trillion
At this point is should be clear that countries can continue to make progress despite the fact that they owe trillions of dollars. The Japanese external debt is large, yet only makes up 60% of GDP.
6. China – $3 trillion
Due to a surge in government spending over the past few years, China’s debt has been growing steadily. Nevertheless, as the world’s largest creditor, it has little to worry about in terms of making payments on time.
5. Luxembourg – $3.47 trillion
One might be surprised to see such a small nation on this list, yet it is quite natural for Luxembourg to be here due to its large financial sector. Money might come and go, but at the end of the day, this tiny European state is a net creditor.
4. Germany – $5.54 trillion
Germany not only has an advanced economy, but is also the most important member of the European Union. Despite preaching about fiscal responsibility, its debt obligations make those of Spain and Italy seem like small potatoes.
3. France – $5.75 trillion
France might not be able to beat Germany when it comes to economic power, yet it has surpassed its neighbour’s level of debt by a small margin. Once again, taking on debt seems more of an economic strategy rather than a desperate measure.
2. United Kingdom – $9.59 trillion
Despite the fact that everything seems to be in order, the United Kingdom’s level of debt is turning into a major concern. Not only is the amount owed very large in absolute terms, debt obligations make up 406% of GDP!
1. United States – $17.75 trillion
What might come as a surprise to some, is a well-known fact to others: the most powerful economy in the world also has the largest debt. Following the financial crisis of 2008, the government has only been able to make ends meet by raising the debt-ceiling, meaning the situation has pretty much gotten out of hand.
