Jump to content
House Price Crash Forum
Sign in to follow this  
mattyfc

Considering Portugal's 'magical Solution'

Recommended Posts

http://seekingalpha.com/article/263133-considering-portugal-s-magical-solution#comments_header

European Council president Herman van Rompuy visited Greece for talks about its austerity program. As the debate over the ultimately unavoidable Greek default heats up once again – a splendid idea, as the earlier it is considered, the less good money will be thrown after bad – van Rompuy pleads with Greece to tough it out.

The debate over debt restructuring, per van Rompuy, is "academic," and restructuring is in any case a "magical solution" that should be avoided at all cost. We would by contrast argue that debt restructuring is the only way for the country to get out of its debt trap.

http://blogs.reuters.com/columns/2010/04/09/sovereign-debt-maths-show-risk-of-vicious-circle/

When all three factors — economic contraction, higher rates and rising deficits — come at once, they easily start fuelling one another in a vicious cycle. If the profligate country has to pay a 6 percent interest rate instead of 4 percent and recession and belt-tightening have cut nominal GDP by 2 percent, a primary surplus of just over 8 percent is required just to keep the ratio of debt to GDP stable.

That is a huge move, and may be too much to bear politically for the sort of country which has historically run big deficits. Investors have good reason to fear some sort of debt work-out. They then don’t push up the interest rate they are prepared to lend at — they stop lending completely.

Greece and Portugal are already in a vicious circle. They are unable to grow fast enough to prevent further debt build up. They are already in recession and face a program of interest rate rises from the ECB that will further punish them.

Even restructuring would not bring them back to growth. There does not seem to be a way out at present.

Share this post


Link to post
Share on other sites

http://seekingalpha....comments_header

http://blogs.reuters...vicious-circle/

Greece and Portugal are already in a vicious circle. They are unable to grow fast enough to prevent further debt build up. They are already in recession and face a program of interest rate rises from the ECB that will further punish them.

Even restructuring would not bring them back to growth. There does not seem to be a way out at present.

one wonders why a mortgage is also known as a ball and chain, if ordinary people can understand that debt holds you back, then surely, Van rumpy pumpy understands it too.

As do the people of PIIGSville.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 317 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.