UBS: Here Are The 19 Countries Most Likely To Default

Mamta Badkar

Italy is being touted as the country that is too big to save. And with the ECB legally prevented from being a lender of last resort, an Italian debt restructuring is inevitable, according to Nouriel Roubini.

Italian 10-year yields have exploded over 7% and clearing house LCH.Clearnet SA has raised the cost of trading Italian debt.

With the the turmoil in Italy, Ireland is having a harder time convincing markets and investors that it could escape contagion. Meanwhile, Greece is still waiting on a new government.

As the European debt crisis continues, we drew on UBS analyst Andrew Cates' aggregate balance sheet risk index to provide a snapshot of the financial fragility of countries that look most likely to default. The factors that help determine balance sheet risk include high cumulative credit outstanding, high banking sector leverage as measured by loan-deposit ratios, and substantial public sector debt as a percentage of GDP.

Note: All data is for 2010. The Balance Sheet Risk index depends on several indicators that include public sector debt as a percent of GDP; loan to deposit ratio (which measures of banking sector stress); and credit to GDP ratio (which measures credit market stress). Credit market is the broader market through which companies try to raise funds through debt sales. It also includes indicators of external fragility like current account balance to GDP ratio and external debt to GDP ratio among others.

#19 U.S.Credit to GDP ratio: 5.1%
Loan deposit ratio: 147%
Public sector debt as a percent of GDP: 92.7%
Total score: 4.8

#18 PolandCredit to GDP ratio: 24.6%
Loan deposit ratio: 106.3%
Public sector debt as a percent of GDP: 54.2%
Total score: 4.8

#17 RomaniaCredit to GDP ratio: 21.2%
Loan deposit ratio: 113.3%
Public sector debt as a percent of GDP: 35.3%
Total score: 5.1

#16 NorwayCredit to GDP ratio: 24.8%
Loan deposit ratio: 214.9%
Public sector debt as a percent of GDP: 54.3%
Total score: 5.1

#15 CanadaCredit to GDP ratio: 23.4%
Loan deposit ratio: 199.3%
Public sector debt as a percent of GDP: 81.7%
Total score: 5.1

#14 ItalyCredit to GDP ratio: 25.3%
Loan deposit ratio: 165.2%
Public sector debt as a percent of GDP: 118.4%
Total score: 5.2

#13 FinlandCredit to GDP ratio: 19.9%
Loan deposit ratio: 156.4%
Public sector debt as a percent of GDP: 50%
Total score: 5.3

#12 BulgariaCredit to GDP ratio: 36%
Loan deposit ratio: 102.6%
Public sector debt as a percent of GDP: 16.6%
Total score: 5.3

#11 NetherlandsCredit to GDP ratio: 15.7%
Loan deposit ratio: 158.7%
Public sector debt as a percent of GDP: 66%
Total score: 5.4

#10 SwedenCredit to GDP ratio: 27.3%
Loan deposit ratio: 237.6%
Public sector debt as a percent of GDP: 41.7%
Total score:

#9 BelgiumCredit to GDP ratio: 22%
Loan deposit ratio: 98.1%
Public sector debt as a percent of GDP: 100.2%
Total score: 5.5

#8 FranceCredit to GDP ratio: 19.4%
Loan deposit ratio: 163.6%
Public sector debt as a percent of GDP: 84.2%
Total score: 5.5

#7 DenmarkCredit to GDP ratio: 44.1%
Loan deposit ratio: 346.1%
Public sector debt as a percent of GDP: 44.2%
Total score: 5.6

#6 HungaryCredit to GDP ratio: 21%
Loan deposit ratio: 123.6%
Public sector debt as a percent of GDP: 85.3%
Total score: 5.8

#5 UKCredit to GDP ratio: 35.2%
Loan deposit ratio: 150.5%
Public sector debt as a percent of GDP: 76.7%
Total score: 6

#4 GreeceCredit to GDP ratio: 55.7%
Loan deposit ratio: 117.7%
Public sector debt as a percent of GDP: 130.2%
Total score: 6.1

#3 SpainCredit to GDP ratio: 66%
Loan deposit ratio: 223%
Public sector debt as a percent of GDP: 63.5%
Total score: 6.3

#2 PortugalCredit to GDP ratio: 53.6%
Loan deposit ratio: 189.2%
Public sector debt as a percent of GDP: 83.1%
Total score: 7

#1 IrelandCredit to GDP ratio: 56.1%
Loan deposit ratio: 187.3%
Public sector debt as a percent of GDP: 99.4%
Total score: 7.6