"There's a rumor going around that states cannot go bankrupt," German Chancellor Angela Merkel said recently at a private bank event in Frankfurt. "This rumor is not true."
Of course she's right. Countries can go bankrupt if they allow their deficit spending to spin out of control and are no longer able to service their interest payments. Merkel's comments can be read as a warning that countries need to keep their deficit spending in check. The message is: If governments go too far in trying to bail out companies and the economy, they could face insolvency themselves.
REUTERS
Great Britain is on the brink of financial ruin.
And so far, national governments have gone very far. Be it in the United States or in Europe, the sums governments are having to cough up to prevent the financial system from collapse are staggering. Germany alone has already provided credit guarantees of