Analysis: Why Europeans should lose sleep over Italy and not Turkey?

The financial net worth of the general government sector is the total value of its financial assets minus the total value of its outstanding liabilities. Positive financial net worth signals the strength and health of public finances. It also shows the government will be able to continue its policy programs without experiencing financial stress. Conversely, negative financial net worth points toward a level of fragility that requires policy actions such as tax increases and/or government expenditure decreases. It is true that this measure only reflects the financial side of the public sector's balance sheet and does not consider the non-financial part. While a government's non-financial assets include buildings, infrastructure, land, and machinery, its non-financial liabilities comprise pensions and health care related costs. Since the measurement of the non-financial part of the balance sheet is not standardized across OECD countries, drawing conclusions based on non-financial assets is rather challenging. For example, many macroeconomists claim that the negative financial net worth of countries like the U.S. and Japan isn't worth worrying about because these countries are asset-rich. This short analysis focuses on the financial side of the balance sheet and uses Financial Net Worth (as percentage of GDP) to shed light on the current situation.