The sovereign debt situation in Europe and particularly in the PIIGS (Portugal, Italy, Ireland, Greece, and Spain) has been a feature in the news since early last year. In recent days though, additional attention has been drawn to this issue as international ratings agency, Fitch, lowered Greece's credit rating further into junk status Friday. They also warned that any attempt to extend the maturities of Greek sovereign debt would be treated as a default.[1]

Likewise illuminating the significance of this problem, eighty-five percent of international investors surveyed by Bloomberg last week said Greece will probably default on its debt, with majorities predicting the same fate for Ireland and Portugal. The European Commission said on May 13 that Greece's debt will reach 166 percent of gross domestic product next year, the highest for any country in the euro's history.[2]

Perhaps you are wondering why debt problems on the other side of the world matter here in the U.S. Admittedly, Greece's annual output is only about one-half of one percent of the world's output and less than three percent of Europe's GDP.[3] But if the problems extend into other Eurozone countries, triggering additional defaults, a slowdown in European growth could occur, creating further drag on the world economy.

To bring matters closer to home, with U.S. debt projected to grow more than 275 percent by 2035[4], the U.S. has financial problems too. American political leaders disagree on how to solve these problems just as Greece's leaders do. This is another reason why many people are watching Europe so closely - they recognize that important lessons can be learned by evaluating how debt problems abroad are resolved.

The average U.S. price of a gallon of gasoline has dropped about 9 cents over the past two weeks bringing the national average for a gallon of mid-grade to $4.05. For premium it's $4.16 a gallon.[5]

With the effects of the earthquake in Japan rippling through the auto industry and causing shortages, prices are rising for both new and used cars. It is also anticipated that fewer models and options will be available come summer, especially for the hybrids and fuel-efficient vehicles that Japan produces.[6]

Oil slid to its lowest price in almost three months last week as a stronger dollar, increasing crude-oil stockpiles, and decreasing demand all took a toll on prices. Crude oil for June delivery dropped 46 cents to $96.91 a barrel on the New York Mercantile Exchange, the lowest settlement since Feb. 22.[7]

The number of American households behind on mortgage payments hovered at its lowest level in nearly two years during the first quarter, but the number of borrowers in foreclosure stayed near record high levels, the Mortgage Bankers Association said on Thursday.[8]