Reuters: Some States Worse Than European Sovereigns

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just posted at Reuters.com suggests that some U.S. states' fiscal problems may be worse than European countries such as Greece and Portugal. While the states debt to GDP ratios are not nearly as elevated as those of European sovereigns, and they aren't as likely to default, their finances look worse based on other metrics. When looking at budget deficits to revenues, both Illinois and New Jersey are in worse shape than even Greece and Portugal, but not as bad as Ireland. When examining the ratio of how much money certain states need to borrow vs. their outstanding debt, Illinois and Pennsylvania far outpace Spain, Portugal, and Greece - not a good sign. This could become a particularly severe problem if interest rates rise too fast and states are unable to sell debt. As a result of the fiscal problems being encountered by states such as Illinois, California and New Jersey, many states are facing significant spending cuts and some analysts believe that it is just a matter of time before a wave of defaults hit municipal bonds. Investors have been pulling out of municipal bonds in droves, which in turn, drives up interest rates in the space.