The Globe and Mail

Like Greece, the government of Portugal has been overspending for decades, boosting the size of its civil service while the economy grew only marginally.

At the start of 2011, Portugal implemented a deep austerity plan, which cut civil service pay and jobs, and reduced unemployment benefits. But with borrowing costs rising, that wasn’t enough. Portugal received emergency loans of €78-billion from the International Monetary Fund and European Union in May, making it the first European country after Ireland and Greece to get a bailout.

On Tuesday, Portugal’s credit rating was cut to junk by Moody's Investors Service, which said the country may require a second rescue package.

Ireland was the first European country to fall into recession in 2008, as unemployment rose and a real estate bubble burst. It was a humbling reversal for a county that had become known as the Celtic Tiger. Irish banks, heavily exposed to the housing market after giving cheap loans to almost anyone who wanted to buy or build, required a rescue from the government. Ireland’s debt levels then soared and borrowing costs spiked.

Late in 2010 the government was forced to take emergency loans of €85-billion from the European Union and the IMF. The Irish economy has improved slightly, but the Greek crisis is keeping borrowing costs high and a second bailout is a possibility.

Japan is the most indebted country in the world, a situation built up over many years by a sluggish economy that just can’t seem to get moving. Stalled growth has forced the government to spend heavily on stimulus, while it deals with the massive social costs of an aging population.

The government’s debt is now almost 200 per cent of GDP, compared with just 60 per cent 20 years ago. However, most of it is held by Japanese citizens, not foreign countries or institutions.

The earthquake and tsunami dealt another blow to the economy, although spending on rebuilding could cause a positive jolt.

With more than $14-trillion in federal government debt, the United States is massively in the red. The situation has worsened in recent years thanks to tax cuts, higher government spending, the bailout of the banking system, military spending, and a stubborn economic slump.

In April, Standard & Poor’s underlined the worries over the United States’ financial situation by downgrading the outlook for country’s debt to "negative" from "stable."

President Barack Obama is under enormous pressure to cut spending to reduce the deficit, and he is in intense negotiations with legislators to get that done. He needs a deal so Congress can boost the country’s official debt ceiling – it must be raised by early August or the United States could default on some of its borrowing.

After years of running surpluses (from 1997 to 2008, to be precise), Canada shifted back into deficit in 2009 because of the stimulus required to pull the country out of recession. Many provincial governments also moved from black to red during the downturn, adding to the overall debt.

While total federal debt is now around $560-billion – it’s higher if provincial debt is included – we are in good shape relative to most other countries, with an economy back on a growth track, albeit a slow one.

Finance Minister Jim Flaherty now promises to balance the books by 2015, but he’ll have to find $4-billion a year in savings to accomplish that.