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- Jean Monnet Lecture Series Center for European and International Affairs University of Nicosia, 20th of March 2012
Overall debt of some countries is far too high Annual budget deficit is too high We are talking about how much new debt is adding to the total debt. NO memberstate is reducing debts currently !
debt increases further more and more (see rating agencies judgement; is this fact fair for young generation ??)
National debt of Greece on the 31/12/2010: 340,29 Mrd (149,7%) 31/12/2011: 367,98 Mrd (170,9%)
Uwe Wixforth LL.M. - Embassy of the Federal Republic of Germany -
Private Sector Involvement (PSI) Austerity Measures of Member States Solidarity = International help (EU/ECB/IMF)
Germany`s position: All three sectors must be in balance Rule for the future: Fiscal Compact / ESM establish policy for fiscal stability
Uwe Wixforth LL.M. - Embassy of the Federal Republic of Germany -
This pillar refers formally only to Greece, not for the other Member States. But for other MS: Collective Action Clauses (CAC) Results of Eurogroup ministerial meeting 21./22. February 2012 on Greece :
haircut 53,5 % Reduction of the debt: 107 Mrd Interest rates of the new Greek government bonds: until 2015: 2% until March 2020: 3% until 2042: 4,3%
3) Euro - bonds ?
I. Economic meaning: Joint bonds issued by all Euro-Zone Member States, sharing the same parameters, i.e. the same interest rate. Joint liability of all MS. II. Germany`s approach Moral hazard may be involved, because no difference between the competitiveness of the specific economies is taken into account
Uwe Wixforth LL.M. - Embassy of the Federal Republic of Germany -
Effect on Competitiveness
a) Member States with a comparatively low competitiveness get relatively cheap money; i.e. cheaper as they would get it under market conditions. Capital costs are lower as in market conditions
b)
Member States with a comparatively high global competitiveness (AAA-countries) have to pay relatively more for Government bonds as normal. Capital costs are higher as in market conditions
Uwe Wixforth LL.M. - Embassy of the Federal Republic of Germany -
higher refinancing costs, economic performance is slowing down in the long run Risk: Europes main Engines are slowing down