Posted on 05/15/2010 10:34:48 PM PDT by TigerLikesRooster
The PIGS’ external debt problem
Ricardo Cabral
8 May 2010
Markets are increasingly concerned that the Greek debt crisis could spread to other Eurozone countries including Portugal, Ireland, and Spain. This column notes that much of these countries' debt is held by non-residents meaning that the governments do not receive tax revenue on the interest paid, nor does the interest payment itself remain in the country. The solution lies with debt restructuring and rescheduling.
Financial markets are focused on the public finances of Portugal, Ireland, Greece, and Spain (the “PIGS”). The PIGS´ public profligacy is partly to blame for their current plight, but other factors are at play. Amid the hype, little attention is paid to the crucial difference between these nations’ public debt and their external debt.
* Debt held by a nation’s own citizens has less pernicious consequences (Scott 2010) – the interest paid is returned to the domestic economy. * External debt, if used to finance non-productive expenditure, is a different matter. Non-residents receive the interest on such debt, making the nation poorer with every interest payment.
(Excerpt) Read more at voxeu.org ...
P!
What are the related CDS values?
Bump for later read..
What happened to Ireland? Just a few years ago it was touted as a high-tech wonder with an highly educated work force, and particularly strong in pharmaceuticals. How did it become a “PIG”?
It was touted.
See California, New York, Michigan, etc. etc. for further examples....
The Obammunist thought he'd pull a fast one with his "Build America Bonds". They were state tax exempt and payed a better rate than Treasuries. He thought he could make up the difference in interest rates through the federal income tax.
People bought them and put them in their IRAs.
This really ticked off the Anti-Capitalist Obama. He demanded legislation be advanced that would rejigger federal tax exemptions for all IRAs.
yitbos
What happened in Ireland is they BORROWED money and spent it for consumption. Don’t worry we are soon to fall in the same abyss.
Portugal, Ireland, Greece, and Spain (the “PIGS”).
PIIGS Italy is the other I.
Ireland is not among the PIGS. This ‘I’ is supposed to be Italy. Ireland is one of Europe’s bright stars economically.
Well maybe the “PIG”s will just tell all the FIAT money Banksters to take a flying leap.
I personally hope they do..
W
Credit Default Swaps? Just a guess.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.