There is no doubt that all of these five countries have issues to deal with at the current time, but there are also a few important features that differentiate them. The similarity is that all of the countries, bar Italy, will experience budget deficits in the range of 8%-11% of GDP in 2010. Starting debt levels differ though with Greece already well over 100% of GDP, while Ireland stands at 65% and Spain at 55%. These two variables are often cited as the main gauges of sovereign risk, but they ignore the wider balance sheet for the economy as a whole – the balance of payments. The balance of payments records transactions with the rest of the world, while within this one can look at the private sector and public sector balances.

This is where the differences really become apparent between the countries mentioned above. Portugal will run a current account deficit of 10% of GDP in 2010, while Ireland may run a small surplus, according to the latest estimates. For Ireland, this means that the large public deficit is being offset by a significant private sector surplus, as households and businesses have slashed spending in the recession. Greece will run a current account deficit of 8% of GDP, while Spain is expected to run a deficit of 5%. In this regard, Portugal and Greece look to be in the most vulnerable position. While spreads on ten-year Irish bonds relative to bunds are still larger than that of Portugal, we would not be surprised if this changes in the very near future, as it has already occurred at shorter maturities. With fiscal consolidation progressing at different speeds in the different countries, a further differentiation is likely at some stage. For now though, fear rules the roost."

US

The Dow fell 268 points or 2.61% to 10,002 on Thursday.

The S&P dipped 3.11% and the Nasdaq dropped 2.99%.

Prof. Peter Morici of the University of Maryland commented on Thursday: "Stocks are tumbling, as investors realize President Obama is simply not offering policies that will fix the US and global economies.

Each week more than 450,000 Americans apply for new unemployment benefits, and 17% of adults can’t find a full time job or have quit looking for work altogether.

Since Massachusetts voters sent Democrats a vote of no confidence, President Obama has been doubling down on bigger government and class warfare as the road to prosperity.

Meanwhile, the two biggest problems that block economic recovery go unaddressed—most businesses lack enough customers and access to bank credit to create jobs.

Just about everyone recognizes consumer spending will not come roaring back. Those few businesses that can increase sales often can’t borrow from banks to expand.

Not surprising, the 5.7% GDP growth recorded in the fourth quarter was mostly an accounting adjustment, reflecting a slower pace of inventory depletion.

Domestic consumption and investment contributed a tepid 1.8% to growth, and that pace is simply not enough to sustain a recovery.

The government is all tapped out. Deficits if pushed any higher could cause an international run on the dollar and a financial calamity even Ben Bernanke’s printing press could not fix. Not surprising the government added zero to fourth quarter growth.

Salvation must come from bringing down the $440 billion trade deficit, and in particular the huge trade imbalance with China. Cutting that deficit in half would boost GDP by 3%, resurrect manufacturing and high wage jobs, and it’s off to races—healthy growth rivaling the Clinton years.

The president’s new export promotion program and small businesses incentives are too little too late.

The president needs to stop talking about Chinese mercantilism and do something about it. Instead, he whines America won’t turn to protectionism

Currency manipulation makes China the most protectionist bully on the planet, robbing growth and jobs from the United States and Europe and increasing the risk that troubled governments like Greece may default.

Meanwhile, after taking $2 trillion in government aid, the banks are dolling out $150 billion in bonuses but are unwilling to loan most businesses the capital they need.

It is high time to separate the commercial banks that enjoy a government guarantee from investment banks like Goldman Sachs. Limit aid to commercial banks for the purposes of making loans, as opposed to trading currency, energy futures and other complex financial instruments.

The president expresses outrage about Chinese trade practices and bank bonuses but refuses to take substantive actions—for example, countering Chinese protectionism with a tax on dollar-yuan conversions to raise the effective price of the yuan, and imposing a 50% tax on bank bonuses as Britain has done.

The markets have figured it out. President Obama is a charismatic campaigner and eloquent speaker, but he simply does not have a grasp of the facts or lacks the courage to fix what is broken in the American economy.

Folly in Washington begets panic on Wall Street."

The MSCI Asia Pacific Index lost 2.6% Friday.

The Nikkei 225 dipped 2.89% and the Shanghai Composite dropped 1.87%; India's BSE Sensex 30 declined 2.78% and Australia's S&P/ASX 200 fell 2.33%.

Asia benchmarks

In Europe, the Dow Jones Stoxx 600 has dipped 1.90% Friday.

British Airways today reported losses before tax of £50m for the three months to December 31st, its third financial quarter - -  lower than expected.

For the first nine months of the year, the airline reported a pre-tax loss of £342m, compared with a £70m loss in the same period a year earlier.

Revenue in the nine months fell 12.9%, but BA said its day-to-day costs dropped by 10.5%, due to lower fuel costs and cost-cutting measures.

British Airways' chief executive Willie Walsh, said: "These results highlight the impact of permanent changes across the company on our costs. Those changes, combined with capacity reductions and external spending cuts, mean operating costs are down by 10.5 percent and show that we've adapted quickly to the new business realities created by the global recession.

"While we are on the right track, we still expect to make record losses this year. Permanent structural change is being introduced in all areas and will return us to sustained profitability.

"We are working with our staff, their unions and the trustees about solutions to address our £3.7 billion pension funds' deficit and are discussing a range of changes to future pension benefits.

"In November, we signed a binding Memorandum of Understanding with Iberia for a proposed merger and are on track to finalise the merger agreement by the end of the year.

"We remain confident of receiving regulatory approval for our proposed transatlantic joint business with American Airline and Iberia."

BA's shares fell 0.57% in London.

In Dublin, the ISEQ is off 1.60%.

CRH has fallen 1.66%; Elan has dipped 2.53%.