To quit the eurozone would only increase their level of indebtedness.

And, given Japan s high level of public indebtedness, the risks of collateral damage and unintended consequences are potentially higher.

Emerging Europe s Deleveraging Dilemma

Economic deleveraging takes time.

7. Welcomes initiatives that have been undertaken to reduce outstanding indebtedness

But the deleveraging process will be gradual and orderly.

With everyone busy deleveraging, economies failed to recover.

Indebtedness must also be properly incorporated into the scale methodology.

The consequences of this excessive indebtedness will take years to undo.

Then eurozone deleveraging kicked in, and now the child in the poster is in serious trouble.

In an open economy, deleveraging does not necessarily impair the tradable sector so thoroughly.

The middle class might turn against the party. Because economic distress harms different social groups simultaneously, it could facilitate the emergence of a broad anti CCP coalition.

Yet the financial crisis and the ensuing recession go only so far towards explaining these high levels of indebtedness.

In the US, economic deleveraging has proceeded significantly further than it has in Europe.

The potential systemic crisis threatens to accelerate deleveraging further, with serious consequences for emerging Europe.

Under these conditions, deleveraging could put emerging Europe on a more sustainable growth path.

Second, Chinese growth will fall under either scenario.

I would like to point out that indebtedness is a form of bondage and indebted economies are economies that function under constraints.

All of this represents an utterly unexpected recovery from the vast public and private external indebtedness of just a decade ago.

What this line of research explicitly does not tell us is that deleveraging will restore growth by itself.

Two intriguing observations emerge from these two scenarios.

It will take years to overcome the excessive indebtedness and real estate overhang that resulted.

As for African countries, the politics and economics of globalization have stripped them of their assets and natural resources and left them with an unbearable debt burden.

The increased indebtedness of households is already leading to higher bankruptcy rates, and will likely dampen the recovery.

Japan s experience shows that a recession that results from a financial crisis can be extremely prolonged, because deleveraging is a long process.

Since their creation in Prussia in 1769 under Frederick the Great, not a single Pfandbrief has defaulted.

Bank lending to sovereign borrowers has been a double disaster, fostering over indebtedness, especially in countries with irresponsible or corrupt governments.

And, as many have argued, the correlation itself could be the result of low growth leading to high indebtedness, rather than the other way around.

It is in that new spirit that Ghana commends and welcomes the recent cancellation by the G 8 of the debt of some countries of the Heavily Indebted Poor Countries initiative.

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

In fact, China already experienced the impact of deleveraging late last year, when the European financial system seemed on the brink of collapse.

Confidence is fragile in an environment characterized by ongoing deleveraging, macro uncertainties, weak labor market growth, and a fiscal drag.

But excessive indebtedness and losses on the risky investments that had been made triggered the global financial crisis and led to the failure, or near failure, of many major financial institutions.

But, in the second half of 2011, the eurozone based parent banks that dominate emerging Europe s banking sector came under renewed pressure to deleverage.

The performance of emerging market currencies and other assets so far in the second quarter suggests that deleveraging has begun once again.

One is that some policymakers think that fiscal balance really is the main pillar in a growth strategy Deleverage quickly and get on with it.

Second, the pace of consolidation should remain moderate as long as private demand remains constrained by deleveraging or credit restrictions.

I wish to congratulate the Group of Eight on the commitments adopted at the Scotland summit to forgive the multilateral debt of 18 least developed countries.

Usually, low interest rates lead firms to borrow more to invest more, and greater indebtedness is matched by more productive assets.

The Greek and Irish bailouts are only temporary palliatives they do nothing to curtail indebtedness, and they have not stopped contagion.

A satisfactory level of mutual trust has been achieved at the most senior level.

Some measurements approaches are at the firm level, some at the product level, and still others are at the consumer level.

Despite tight monetary policy and foreign exchange regulations, the scheme has boosted trade and investment while reducing intraregional indebtedness.

An even better solution would be to go the European way get rid of non recourse loans and develop a system of finance based on covered bonds, such as the German Pfandbriefe .

But there is a deeper problem that has been overlooked the US economy relies upon asset price inflation and rising indebtedness to fuel growth.