Abstract
Title of this chapter indicates that the US and the heavily indebted countries in the Euro zone have a dual debt problem: a balance of payment deficit, engendering the need to borrow from other countries, and a sovereign debt problem, engendering a need to borrow from anywhere. The chapter discusses the nature and the order of magnitude as well as the possible solutions of the dual debt problem of the United States and the case of Greece and Italy to illustrate the situation in Europe and the Euro zone. The thrust of the argument is that there is need for both fiscal correction and for sustained growth, and for improving the competitive position of the indebted deficit countries on both sides of the Atlantic.
* The research for this chapter was partially supported by a research grant from Webster University, Geneva.
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Notes
The Economist (2011) “Climbing Greenback Mountain,” September 24–30, 2011, pp. 13–18.
For a full discussion of the Washington gridlock, see Michael Sakbani (2011) “The US Budget Impasse: Dogma v. Economic Sense,” in michaelsakbani.blogspot.com, August 1.
Erskin Bowels and Allen Simpson (2012) The National Commission on Fiscal Responsibility and Reform, Washington, DC, January 31.
The Daily Bail (2012) “Wake Up America: The Real US Budget Problem: Defense and War Spending,” in OZHOUSE.org.
At the inception of the Euro zone, the convergence criteria were a maximum budget deficit of 3% of a country’s GDP, no more than 70% debt to GDP, and exchange rate and interest convergence over the previous three years. See for details, Michael Sakbani (1998) “The Euro on Schedule: Analysis of its European and International Implications,” Miklós Szabô-PelsBczi (ed.) European Monetary Integration, Avebury and the Robert Triffin Foundation.
The Wall Street Journal (2012) “Greece Sets Austerity Plan: Leaders Approve Unpopular Cuts; Europe Wants Vote to Secure Another Bailout,” February 10.
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© 2013 Michael Sakbani
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Sakbani, M. (2013). The Dual Debt Problem in the US and in Europe: Are Policy Makers Addressing the Right Issues?. In: Hieronymi, O., Stephanou, C.A. (eds) International Debt. Palgrave Macmillan Studies in Banking and Financial Institutions. Palgrave Macmillan, London. https://doi.org/10.1057/9781137030573_3
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DOI: https://doi.org/10.1057/9781137030573_3
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-44049-8
Online ISBN: 978-1-137-03057-3
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