Grisù
Forumer attivo
To quote the example of Greece: it has a gross debt of around €330 billion and marketable assets worth up to €300 billion, so the country is solvent to the extent that it is willing to sell off some of these assets. The same conclusion would be reached by looking at the measures required to achieve a balanced budget, which largely consist of reversing the decisions taken over the last ten years in respect of public sector wage rises, expenditure increases and the adoption of standard structural reforms which would bring Greece in line with other euro area countries. Just to give an example, if, over the last 10 years, Greek public sector wages had gone up at the same pace as inflation, and public employment had not increased, in 2010 the Greek budget deficit to GDP ratio would have been around 4 percentage points lower and the debt to GDP ratio about 30% lower. [4]
The key question is whether the Greek government and the Greek people are willing to implement these measures. The answer to this question largely depends on the alternative scenario, which is a default or restructuring of the public debt. A rational analysis comparing the economic, financial, social and political costs of implementing the needed adjustments, including privatisation, and the costs of a default/restructuring would conclude that the former costs are lower. A rational decision-maker would thus opt for the adjustment and, on that basis, Greece should be considered solvent and should be asked to service its debts.
The second difference between debt workouts in the corporate and public sectors is that, unlike a company, a sovereign cannot be liquidated. There are no insolvency laws or bankruptcy forum to address sovereign solvency problems, and IMF attempts to do so during the last decade failed, for several reasons. What is clear is that in the case of an insolvent sovereign, further official finance can only be provided when that sovereign restructures its debts and, at the same time, undertakes serious and credible domestic fiscal adjustment and structural economic reforms. [5]
The third feature that generally sets sovereign and corporate debt workouts apart is the externalities they may generate. A debt restructuring of a sovereign may have severe implications, both for the debtor’s and the creditor’s economies.
Most of the experience in this area has involved less developed countries. In these cases private sector involvement has largely been a concern for foreign creditors. Taxpayers in creditor countries were affected, depending on the size of the exposure of their respective financial system and on whether the soundness of that system was jeopardised. Measures have been used in the past to try to reduce this impact, in particular through regulatory forbearance. One example is the prudential measures which, during the 1980s, permitted US banks to book Brady bonds at their nominal value.
Historical experience has also rejected the Panglossian view that there exists such a thing as an orderly debt restructuring. While some restructurings have indeed been successful and can arguably be said to have occurred in an orderly fashion, they were often on a small scale and executed under specific circumstances. The most striking and oft-quoted case is Uruguay. However, more often than not, restructurings have been disorderly, harmful and fraught with difficulties. The average length of the negotiations is 2½ years [6] and it can vary greatly. In some cases, negotiations have taken just a few months (for instance, Uruguay in 2003, Pakistan in 1999, Chile in 1990 and Romania in 1983); in other cases they have taken many years (for instance, Vietnam from 1982 until 1998, Jordan from 1989 to 1993, Peru from 1983 to 1997 and Argentina more recently). Empirical evidence also shows that private investors are likely to penalise a country which has a history of restructuring and to demand higher risk premia. [7]
ECB: Private sector involvement: From (good) theory to (bad) practice
The key question is whether the Greek government and the Greek people are willing to implement these measures. The answer to this question largely depends on the alternative scenario, which is a default or restructuring of the public debt. A rational analysis comparing the economic, financial, social and political costs of implementing the needed adjustments, including privatisation, and the costs of a default/restructuring would conclude that the former costs are lower. A rational decision-maker would thus opt for the adjustment and, on that basis, Greece should be considered solvent and should be asked to service its debts.
The second difference between debt workouts in the corporate and public sectors is that, unlike a company, a sovereign cannot be liquidated. There are no insolvency laws or bankruptcy forum to address sovereign solvency problems, and IMF attempts to do so during the last decade failed, for several reasons. What is clear is that in the case of an insolvent sovereign, further official finance can only be provided when that sovereign restructures its debts and, at the same time, undertakes serious and credible domestic fiscal adjustment and structural economic reforms. [5]
The third feature that generally sets sovereign and corporate debt workouts apart is the externalities they may generate. A debt restructuring of a sovereign may have severe implications, both for the debtor’s and the creditor’s economies.
Most of the experience in this area has involved less developed countries. In these cases private sector involvement has largely been a concern for foreign creditors. Taxpayers in creditor countries were affected, depending on the size of the exposure of their respective financial system and on whether the soundness of that system was jeopardised. Measures have been used in the past to try to reduce this impact, in particular through regulatory forbearance. One example is the prudential measures which, during the 1980s, permitted US banks to book Brady bonds at their nominal value.
Historical experience has also rejected the Panglossian view that there exists such a thing as an orderly debt restructuring. While some restructurings have indeed been successful and can arguably be said to have occurred in an orderly fashion, they were often on a small scale and executed under specific circumstances. The most striking and oft-quoted case is Uruguay. However, more often than not, restructurings have been disorderly, harmful and fraught with difficulties. The average length of the negotiations is 2½ years [6] and it can vary greatly. In some cases, negotiations have taken just a few months (for instance, Uruguay in 2003, Pakistan in 1999, Chile in 1990 and Romania in 1983); in other cases they have taken many years (for instance, Vietnam from 1982 until 1998, Jordan from 1989 to 1993, Peru from 1983 to 1997 and Argentina more recently). Empirical evidence also shows that private investors are likely to penalise a country which has a history of restructuring and to demand higher risk premia. [7]
ECB: Private sector involvement: From (good) theory to (bad) practice
Ci mancherebbe altro che alla mia età cambiassi idea ad ogni stormir di foglia, e non lo faccio per uno stupido principio, ma perchè sono convinto che la situazione greca complessiva (quindi non solo quella finanziaria, ma anche politica in ambito UE) sia migliore di quella di poco più di un anno fa. Gli egoismi europei si fermeranno ancora una volta davanti al baratro: troppa fatica hanno fatto per arrivare all'attuale costruzione europea e sanno benissimo che la mancanza di solidarietà verso uno stato come la Grecia minerebbe dalle fondamenta non la finanza ma la futura politica europea.
