Recovery teeters as debt threat spreads

The world may have averted another Great Depression, but the aftershocks of the 2008 financial meltdown continue to rattle the global economy.

The debt threat stalking some of Europe's weaker economies, the tumbling euro, the United States' eye-popping deficit and its still-deteriorating job market are all powerful reminders that the deep-rooted fiscal problems that pushed the global financial system to the brink continue to pose serious risks to stability.

The latest flashpoint is Portugal, where the country's parliament defeated an austerity plan Friday. The rejection spooked investors from Toronto to Tokyo….

The global stock market's sudden weakness unwinds some of the months-long rebound as investors awake to the possibility that recovery could be a decade-long project, rather than a quick turnaround….

The big worry in late 2008 and early 2009 was the collapse of the banking system. Now, the angst is about government debt….

The good news is that bank bailouts, easy money and gushers of government stimulus probably saved the global economy from collapse.

The downside is that those efforts shifted the world's debt hangover from consumers and businesses onto the backs of taxpayers.

The big question now is what countries can afford the mortgage. And in recent months, speculators have taken aim at countries they see as the weakest links, including Dubai, Ireland and the so-called PIIGS of Europe – Portugal, Italy, Ireland, Greece and Spain.

But economists warn that the larger industrialized economies of North America, Japan and Europe won't be immune to similar sovereign debt pressures forever. …

The same problems plaguing Portugal and Greece could be “dress rehearsal for what the U.S. and U.K. may face further down the road,” Jim Reid, a strategist at Deutsche Bank in London, warned in a research note.

And in a sobering opinion piece in Friday's Wall Street Journal, New York University economist Nouriel Roubini and Eurasia Group president Ian Bremmer argued that the same pressures will eventually force the United States to put its fiscal house in order by raising taxes and slashing government entitlements, such as Medicare and Social Security….