Debt sustainability and debt relief

Debt sustainability is also affected by vulnerability to external shocks.

A long term alternative requires some capacity to write down debt where it has reached excessive levels.

Either way, debt ratios will rise, and the competitiveness gap with Germany will widen.

7. Stresses that debt sustainability depends upon a confluence of many factors at the international and national levels, underscores that no single indicator should be used to make definitive judgements about debt sustainability, and emphasizes that country circumstances should be taken into account

To move forward, the Secretary General proposed that debt sustainability should be redefined as the level of debt that allowed a country to achieve the Millennium Development Goals and reach 2015 without an increase in its debt ratios.

This strategy s success presupposes that, in the interim, economic growth will strengthen the capacity to repay debt down the line.

Without growth, tax revenues will remain stagnant, and the capacity to service debts will continue to erode.

Finally, despite the highly technical character of DSA, it does not address many issues.

In this regard, the task force deems it necessary to define debt sustainability within a State context with a view to attaining a level of debt that allows countries to achieve the Goals and avoid an increase in debt ratios by 2015.

However, much more needed to be done to assist countries that had reached the completion point but continued to experience severe debt sustainability and debt servicing problems.

This prevents timely debt workouts when needed, effectively impeding recovery.

Emphasizes that creditors and debtors must share responsibility for preventing unsustainable debt situations

4. Emphasizes that creditors and debtors must share responsibility for preventing unsustainable debt situations

Second, Germany s experience with this kind of agency shows that it is impossible to sell off large parts of an economy simultaneously.

Excessive centralization and harmonization are decimating the subsidiarity and competition needed to drive Europe s economies, as the socialization of debt undermines weaker economies accountability.

While some of our countries have benefited from debt relief strategies including the Highly Indebted Poor Countries Initiative that has not as yet resulted in debt sustainability in the region.

3. Also emphasizes that creditors and debtors must share responsibility for preventing unsustainable debt situations

That way, the economy as a whole would not come under pressure to deleverage and thus push production below potential output.

Otherwise, a liquidity run would create solvency problems for all the big eurozone debtors.

Invite the Bretton Woods institutions to consider the issue of debt sustainability and the implications of an HIPC initiative for Haiti.

Emphasizing the important role that private sector creditors play in debt relief and debt sustainability,

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

Recession and price deflation reduce tax receipts and worsen the dynamics of public debt, threatening the return to sustainability.

But when a government does that, output and incomes decline, unemployment increases, and the ability to repay may actually decrease.

Such initiatives should include efforts by IMF and the World Bank to develop a debt sustainability framework for low income countries.

For many heavily indebted non HIPC and middle income countries, debt sustainability will require significantly more debt reduction or restructuring than has yet been proposed.

To move forward, we should redefine debt sustainability as the level of debt that allows a country to achieve the Millennium Development Goals and reach 2015 without an increase in debt ratios.

Converting some portion of debt to equity under predetermined solvency threatening conditions would provide an extra layer of protection.

Invites the Bretton Woods institutions to consider the issue of debt sustainability and the implications of the Highly Indebted Poor Countries (HIPC) initiative for Haiti

A long term alternative requires some capacity to write down debt where it has reached excessive levels. But it is also necessary to establish an iron clad guarantee of some part of the outstanding debt, in order to remove fear of a complete write down.

Limited capacity for debt socialization reflects the EU Treaty s no bailout clause, which bars outright mutualization at the eurozone level of (national) public debt.

Other peripheral countries already have Greek style problems of debt sustainability and eroded competitiveness.

For the Club Med members of the euro zone Italy, Spain, Greece, and Portugal public debt problems come on top of a loss of international competitiveness.

Sixth, even if Greece and other peripheral eurozone countries are given significant debt relief, economic growth will not resume until competitiveness is restored.

But, even in such an economy, years of debt fueled domestic demand may produce a loss of competitiveness and structural distortions.

They would have to tackle the banking and the sovereign debt problems simultaneously, without neglecting to reduce divergences in competitiveness.

It was already clear in the first half of 2010, when Greece lost access to financial markets, that the public debt was unsustainable.

In June 2004, the Evian approach was applied to examine the debt of Gabon, and the Debt Sustainability Analysis concluded that Gabon's debt is sustainable in the short term.

Why debt relief now? Liberia obtained its debt write off by initiating profound changes in its governance and economic management in order to provide the institutional capability to manage debt prudently and spend resources wisely in the future.

Things are trickier when public finances are under acute stress and markets are worried about sovereign solvency, as is the case in southern Europe.

For countries that have reached the completion point, the challenge is to achieve lasting debt sustainability and avoid falling into a new debt trap.

First, the eurozone authorities misread the real causes of the debt crisis, which stemmed mainly from a growing competitiveness gap between the core and periphery countries.

Beyond the Millennium Development Goals, the long term sustainability of debt depends on the growth and export prospects of debtor countries and, hence, on their success in overcoming structural development problems.

Thus, the Paris Club's Evian approach relies on IMF Debt Sustainability Analysis for determining the terms of debt reschedulings.