This week’s IGM Economic Experts Panel statements:
A. Even if all the official-sector funding that Greece received from 2010 through August 2012 is written off, propping up Greece to buy time for the rest of Europe to prepare for Greek default has been better for citizens of the Eurozone outside of Greece than a policy that would have cut off funding sooner.
B. A substantial sovereign-debt default by some combination of Greece, Ireland, Italy, Portugal and Spain is a necessary condition for the euro area as a whole to grow at its pre-crisis trend rate over the next three years.
C. Unless there is a substantial default by some combination of Greece, Ireland, Italy, Portugal and Spain on their sovereign debt and commercial bank debt, plus credible reforms to prevent excessive borrowing in the future, the euro area is headed for a costly financial meltdown and a prolonged recession.
Keyword: debt sustainability
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This week’s IGM Economic Experts Panel poll statements:
A) Reducing the minimum retirement age in France from 62 back to age 60, permanently, would reduce long-term French economic growth and substantially raise French debt relative to GDP over time.
B) France’s overall employment is higher today because of the 35 hour work week than it would be without a limit on weekly hours.
This week’s IGM Economic Experts Panel poll statements:
A) Credible assumptions for inflation, GDP growth and primary budget deficits in Italy imply that either the Debt-to-GDP ratio in Italy would increase sharply if Italian interest rates on 10-year government debt remained at the November 30 level of around 7 percent or Italy would lose access to the bond market.
B) Absent outside help to deal with runs, such as a pledge of fiscal support from Germany or an unlimited commitment by the ECB to buy bonds, there is no spending-and-tax plan Italy can announce that would be credible enough to hold its interest rates low enough to stabilize its Debt-to-GDP ratio.
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