In reality, Many Governments Were Already Insolvent before the Great Recession of 2007-2008, and Default Was Only a Matter of Time

The sovereign debt crisis that followed the Great Recession looked very serious because it involved developed Europe. The implicit story in the public discourse seemed to go as follows: the Great Recession has reduced GDP and, consequently, incomes and tax revenues; the crisis also has increased government expenditures; the result is that government deficits have increased, pushing up the public debt to dangerous territory. This story is misleading. In reality, many governments were already insolvent before the Great Recession, and default was only a matter of time. The economic crisis only revealed and exacerbated the problem and brought the day of reckoning earlier.

The Great Recession started in America at the end of 2007. . . . The recession rapidly spread to Europe. . . . The causes of the Great Recession are still a matter of debate, and will probably remain so for a long time, as economists are still debating the causes of the Great Depression which took place 80 years ago. I have argued that one should first look at the crime scene, which is the government-supported residential mortgage market in America; a second cause can be found in the loose monetary policy of the Fed (and other central banks) from 2001 to 2004.

The Great Recession was barely over when the European sovereign debt crisis struck.

--Pierre Lemieux, The Public Debt Problem: A Comprehensive Guide (New York: Palgrave Macmillan, 2013), 32-33.