by Michael Mussa
Peterson Institute for International Economics
May 17, 2010
In recent weeks, turbulence has returned to global financial markets due primarily to deepening fears about the ability of Greece to service its sovereign debt and widening concerns about the ability of some other advanced European countries with large budget deficits and/or high ratios of public debt to GDP to meet their obligations. Led by Greece, interest rate spreads for some European sovereigns have shot up, equity markets have sold off in Europe and beyond, and measures of financial stress and volatility have escalated (although they generally remain well below their crisis peaks in late 2008 and early 2009).