Whether it works will be seen in April, when Greece will have to refinance its debt once more.

The ability to refinance government debt and keep costs down is essential to strengthening public finances and boosting GDP growth.

In addition, to narrow the competitiveness gap, all members should be able to refinance their existing debt at the same interest rate.

The solution is obvious deficit countries must be allowed to refinance the bulk of their debt on the same terms as surplus countries.

The solution is obvious deficit countries must be allowed to refinance the bulk of their debt on the same terms as surplus countries.

Worse, the government might be unable to refinance its debt at all, and then would have to cut spending and raise taxes sharply.

The ECB would not be facilitating additional borrowing by member countries it would merely allow them to refinance their debt at a lower cost.

Taxation remains the dominant source of government revenue in most developed countries. But the role of debt finance has been growing and, with it, the need to refinance old debt when total expenditure, including debt service, exceeds total revenue.

Larger firms even those with large debt problems can refinance their excessive liabilities in court or out of court but an unprecedented number of small businesses are going bankrupt.

Italy and Spain would then be able to refinance their debt at close to the ECB s deposit rate, which is currently 1 on mandatory reserves and 25 basis points on excess reserve accounts.

Advocates of austerity counter that confidence in the government s credit might collapse, and the government might have to roll over its debt on unfavorable terms. Worse, the government might be unable to refinance its debt at all, and then would have to cut spending and raise taxes sharply.

The higher rates made it more costly for Greece to refinance its debt, creating a fiscal crisis that has forced the government to impose severe austerity measures, leading to public unrest and an economic collapse that has fueled even greater investor skepticism about Greece s ability to service its debt.

The only means to refinance Greece s debt at an affordable level would be to grant long term, subsidized loans that ultimately would cover a large part of the liabilities coming due in the next 3 5 years.

And if they habitually decadalized GDP, multiplying the quarterly GDP numbers by 40 instead of four, Greece s debt burden would be 15 . From the standpoint of Greece s ability to pay, such units would be more relevant, since it doesn t have to pay off its debts fully in one year (unless the crisis makes it impossible to refinance current debt).

Any hint that the country may be locked again in parliamentary inertia, as in the final months of Berlusconi s last government, would push the markets to question the credibility of Italy s fiscal consolidation plan, jeopardizing the country s ability to refinance its debt.

Rising house prices also allowed homeowners to refinance their mortgages, obtaining additional cash to spend on other things.

Instead, easy money stimulated the economy by inducing households to refinance their mortgages, and to spend some of their capital.

I have proposed a plan that would allow Italy and Spain to refinance their debt by issuing treasury bills at around 1 . I named it in memory of my friend Tomasso Padoa Schioppa, who, as Italy s central banker in the 1990 s, helped to stabilize that country s finances.

Lower interest rates worked (a little), but for the most part by encouraging households to refinance their mortgages, not by stimulating investment.

This was a profitable model when Spanish banks were able to refinance themselves at a spread much lower than 100 basis points.

That is why it has become so difficult for small and medium sized companies to get new loans or to refinance existing loans.

Many local Spanish banks can thus stay afloat only because they refinance a large share of their mortgage book via the European Central Bank.

When the pyramid starts crumbling, government that is, taxpayers must step in to refinance the banking system, revive mortgage markets, and prevent economic collapse.

Many who want to refinance their mortgages still cannot, because they are underwater (owing more on their mortgages than the underlying property is worth).

Instead, they focused exclusively on US foreign debt, ignoring household debt (mortgage and consumer debt), public debt, business debt, and financial debt.

Debt sustainability and debt relief

Lower interest rates worked, but not so much because they boosted investment, but because they led households to refinance their mortgages, and fueled a bubble in housing prices.

More debt relief encompassing more countries and more debt (including bilateral debt) is needed.

Unsustainable private debt problems must be resolved by defaults, debt reductions, and conversion of debt into equity.

Debt

These differences, and the lessons that have been learned from Japan s lost decade about the need to refinance the banking system, suggest that a lost decade for the US is most unlikely.

The country simply cannot keep on piling debt upon debt.

Fifth, debt burdens that cannot be eased by growth, savings, or inflation must be rendered sustainable through orderly debt restructuring, debt reduction, and conversion of debt into equity.

The demand for debt repayment confronts the philosophy of debt forgiveness.

External debt

External debt

Debt relief

External debt

But, while debt forgiveness benefits holders of both equity and debt, debt holders don t voluntarily agree to it for two reasons.

Options for lower debt burdens on Governments of heavily indebted developing countries include debt cancellation and debt swaps for sustainable development.

To address the debt burden problem, many African countries at first resorted to repeated debt rescheduling which focused on debt service flows, resulting in steadily increasing debt stocks and related service payments.

Debt relief, debt swaps or debt cancellation could offer important means for mobilizing resources for accelerating progress towards the water and sanitation goals.

Restructuring Debt Restructuring

China s Debt Termites

Debt Déjà Vu