US and European cities face major debt crisis

The Guardian Weekly ran an article this week on city debt. There are major concerns that the debts facing major cities in the US and Europe are going to derail any recovery. According to Meredith Whitney, the US research analyst who predicted the global financial crisis, “next to housing this is the single most important issue in the US and certainly the biggest threat to the US economy”.

US cities debts = $2 trillion
European cities debts = $1.7 trillion

Current state of affairs in the following cities:

San Diego, Ca.
Deficit through June 2012 : $73 million
Budget in FY2011: $2.85 billion

New York, NY
Deficit through June 2012: $2 billion
Budget in FY2010: $63.1 billion

San Francisco, Ca.
Deficit through June 2012: $380 million
Budget in FY2011: $6.55 billion

Los Angeles, Ca.
Deficit through June 2012: $438 million
Budget in FY2011: $6.7 billion

Detroit, Mi
Deficit through June 2011: $85 million
Budget in FY2011: $3.1 billion

Madrid, Spain
Struggling to pay creditors including providers of basic services such as street cleaners

Florence, Italy & Barcelona, Spain
Threat of Moody’s rating agency downgrade

Naples, Italy & Budapest, Hungary
Debts are on the brink of junk status

Istanbul, Turkey (see photo above)
Debt has junk status

According to one economist “cities are on their own and governments won’t come to their rescue as they have problems of their own.”

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