6fbe670446f86f380e1ec628_tb1014.jpg Tim Brinton

The Debt Death Trap

The Greek financial saga is the tip of an iceberg of problems of public-debt sustainability for many advanced economies. All successful financial rescues require the country’s credible willingness to impose fiscal austerity and structural reforms, as well as massive front-loaded official support to avoid a rollover crisis of maturing public and/or private short-term debts.

NEW YORK – The Greek financial saga is the tip of an iceberg of problems of public-debt sustainability for many advanced economies, and not only the so-called PIIGS (Portugal, Italy, Ireland, Greece, and Spain). Indeed, the OECD now estimates that public debt-to-GDP ratios in advanced economies will rise to an average of around 100% of GDP. The International Monetary Fund has recently put out similar estimates.

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