It winds up borrowing temporarily with short term debt then, as borrowing accumulates, it is refinanced with longer term securities.

Too many big investors can no longer meet their margin calls, while borrowing costs have risen sharply.

To be sure, retrenchment could entail some short term costs but the longer term benefits would be much bigger.

Spanish borrowing costs are also rising.

Long term government bond yields are already very low, and a further reduction will not significantly change private agents borrowing costs.

This misconception reduces the short term solution to affected governments sharply higher borrowing costs to bailouts. In fact, properly structured reforms have both short and long term effects.

But hints of new fiscal imprudence or of backsliding on long term debt consolidation and reduction can drive up borrowing costs dramatically.

But the banks are profitable ongoing enterprises in the current low interest rate environment, because they typically engage in short term borrowing and longer term lending at higher rates, with leverage.

Meanwhile, high domestic borrowing costs are undermining private investment.

In fact, evidence shows that building cities right generates near term benefits, while reducing the longer term costs associated with sprawl, congestion, pollution, and climate change.

Thematic funds have fewer restrictions than most other resources, allowing for longer term planning while reducing transaction costs and recovery rates.

High borrowing costs are needed to focus minds and instill discipline.

The result was a dramatic reduction in the British state s borrowing costs and the emergence of a well functioning capital market, which caused private borrowing costs to fall as well.

Part of the problem is blinkered decision making. EU leaders focus narrowly on limiting short term financial and political costs, rather than thinking strategically about broader longer term consequences.

That drives up affected governments borrowing costs further, fueling a downward spiral.

Borrowing costs for the Spanish and Italian governments have similarly fallen dramatically.

In these circumstances, continuing to raise borrowing costs would be a mistake.

Eurobonds would cut borrowing costs for the European Union s two large troubled members.

The polarization of borrowing costs has politically explosive distributional effects Germany is borrowing and refinancing its existing debt at artificially low interest rates.

And raising borrowing costs for governments with dangerously heavy debts thereby discouraging them from further borrowing is precisely what we should want to do.

The longer Italian and Spanish borrowing costs remain at such elevated levels, the greater the damage to those economies, and the harder it will become to marshal the necessary political support for further reforms.

Third, government could assume part of a mortgage, taking advantage of its lower borrowing costs.

There would be worries that adding cocos to sovereign bonds might raise governments borrowing costs.

Longer term trends have also improved.

The longer term trends are clear.

A combination of defective growth models, rising longevity, and unanticipated increases in costs (such as health care in America) have caused these longer term liabilities to explode.

While consolidation may imply some short term costs, especially in a recession, the long term costs of delay are large.

It is no secret that sovereign bonds carry significantly higher borrowing costs than concessional debt does.

A default would also appropriately place part of the costs of Greece s borrowing spree on creditors.

The new Basel III package of global banking reforms may increase funding costs further for some borrowers, while reducing the availability of finance, especially for longer term debt.

The steady increase in production costs, partly attributable to high borrowing costs, is squeezing enterprises profit margins of small and medium sized enterprises in particular.

But eurozone members that currently benefit from exceptionally low borrowing costs Germany, Austria, Finland, the Netherlands, and, to a lesser extent, France maintain that Italian and Spanish borrowing costs largely reflect these countries failure to reform their economies and strengthen their public finances.

To be sure, QE and other unconventional monetary policies do have important short term benefits. But if such policies remain in place for too long, their side effects could be severe and the longer term costs very high.

But that growth has significant longer term implications.

The longer term challenge for Europe is demographic.

First, the domestic interest groups that benefit from low borrowing costs have become a barrier to their liberalization.

debt service coverage reduces the financial risk to investors and translates into lower borrowing costs for the borrower.

If their public argument is incorrect (and they must know it), why do bankers prefer short term borrowing to long term equity finance?

The status quo is untenable in the longer term.

But longer term secular factors also play a role.

A tax on stock transactions encourages longer term holdings.

In nominal terms, Italian and Spanish borrowing costs are indeed comparable to the levels of the late 1990 s.

Strong economic performance reflects strong domestic demand in the US, owing to low borrowing costs and rising asset prices.

Over the last decade, these countries foreign exchange reserves have swelled from 750 billion to 6.3 trillion more than 50 of the global total providing a major source of financing that has effectively suppressed long term US borrowing costs.

One big challenge in the promotion of trade and transport facilitation is the fact that implementation costs are immediate, while benefits are potential and cannot be counted on in the longer term.