Posted by Dr. Constantin Gurdgiev
- Issuing Eurobonds to swap for existent Government debt is equivalent to attempting to treat debt overhang by relabeling the debt. While it might reduce the interest burden on the sovereigns suffering from more severe debt overhang, but that is a relatively shallow improvement, especially given that the heavier-indebted sovereigns are already being financed or about to be financed from a collective funding source of ESM.
- Issuing Eurobonds to create capacity for new borrowing is equivalent to fighting debt overhang with more debt. In addition to being seriously problematic in terms of logic, there is also a capacity constraint. Eurozone will sport 89.964% debt/GDP ratio this year and under current IMF projections this debt will remain above 90% (+/-1%) bound for 2012-2015. At these levels, debt exerts long term drag on future growth potential for the Euro area as a whole.
full article at source: http://trueeconomics.blogspot.com/
- Why Germany doesn’t want eurobonds (thepressnet.com)
- Eurobonds: an essential guide (thepressnet.com)
- Hollande steps up eurobonds push – deepened EU economic union discussed (timesofmalta.com)
- High levels of public debt can massively reduce growth: or so says Rogoff and the Reinharts (clubtroppo.com.au)
- This Week: The Eurobond Coalition Plans To Gang Up On Angela Merkel (businessinsider.com)