May 11, 2011

Debt and Taxes in the Eurozone

Daniel Gros, Project Syndicate

AP Photo

The current crisis in the eurozone is known around the world as the “euro sovereign-debt crisis.” But the crisis is really about foreign debt, not sovereign debt.

The importance of foreign debt is well illustrated by the case of Portugal: although the country’s public-debt and deficit ratios are broadly similar to those of France, the risk premium on its public debt increased continuously, until it was forced to turn to the European rescue fund. The key problem confronting Portugal is thus not fiscal policy, but the high (foreign) debt of its private sector – its banks and enterprises.

Read Full Article ››

TAGGED: Portugal, Greece, Eurozone

RECOMMENDED ARTICLES

May 14, 2012
Everyone's Bluffing, Including the Greeks
Matthew Yglesias, Moneybox
Is a Greek departure from the Eurozone imminent? The smart set in the world media seems to have decided overnight that it is, but I'm not so sure. more ››
There are many things Alexis Tsipras likes about Germany. The leader of Greece's Coalition of the Radical Left (Syriza) party drives his BMW motorcycle to work at the Greek parliament in the morning, Germany's über-leftist... more ››
May 15, 2012
Greece Heads for the Exit
Jeremy Warner, Daily Telegraph
European policymakers are about to commit another major blunder in their handling of the eurozone debt crisis, and this time it could well be fatal. more ››
May 14, 2012
Greece's Default Is Coming
Wolfgang Munchau, Financial Times
What would constitute an economically rational choice for Greece, given the economic and political situation? I see four options, each of which is fraught with uncertainty. The first would be the status quo: more austerity and... more ››