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Given our discussion of Stiglitz's book as well as our discussion of debt from previous books, what are your thoughts on this author's analysis of Sweden's discussion of the Euro crisis? The author interpreted Sweden's overall solution to Europe's problems: "restructure wobbly debt and write-down dud loans without delay." Further, "excessive prudence is as dangerous as gross recklessness when it comes to correcting imbalances, it was suggested." What do you think Stiglitz would have to say about this? You can read the article here:
http://www.economist.com/blogs/freeexchange/2011/05/swedish_view_euro_crisis?fsrc=scn/tw/te/bl/getonwithit
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For some reason I dont think "restructuring wobbly debt and write-down dud loans without delay." is as easily said as done.
ReplyDeleteThree ways to restructure:
A country can pay off its debt by taking out a new loan on lighter conditions, such as paying back over a longer time, possibly at a lower interest rate. This is known as refinancing.
Another way is to persuade the country’s creditors to agree to be paid a reduced percentage of their debt. This is known as a “haircut”,
Finally, they can “reprofile”. aka a “soft restructure”, in which investors agree to change the terms of the bonds – often to extend the period over which debt is repaid.
Although the short term implications may save the country from insolvency the long term implications may not be that sound, but I guess their is no long term if a country is insolvent.