jaichind
Atlas Star
Posts: 27,538
Political Matrix
E: 9.03, S: -5.39
|
 |
« on: June 30, 2015, 08:28:17 PM » |
|
|
« edited: June 30, 2015, 08:30:13 PM by jaichind »
|
If the entire argument is that austerity is counterproductive by lowering the nominal GDP making the debt burden even higher (this is Krugman's argument), then to some degree I agree. But the Greek government them must make a proposal that get the EU to align their interests this with argument.
What they can propose is the following:
"Net debt to GDP is 180%. Lets restructure the debt to be linked to nominal GDP. Lets make change the face value (and with it coupon payments) of the debt to linked to GDP. Let total debt to GDP have a cap of 160% of GDP and floor of 140% of GDP. Assuming we only pay on coupons for the next few years if nominal GDP goes down than the corresponding coupon payment will also fall to follow the cap of 160% of GDP. As nominal GDP rises as a result of the recovery as a result of lower coupon payments to a degree that the face value of the debt falls below 140% of GDP the face value of the debt and coupon payment rises to keep the floor of 140% of GDP."
The idea is you want to get the EU to by into the Keynesian logic that if you decrease demand total output falls as well with less to tax. And you do that by giving the EU the ability to share in the upside if this logic works out. Just sitting demanding that people just forget about the fact you owe this money fair an square does not got down well. If you want debt holder to forgive some debt then you must give the debt holder an incentive to do this by sharing in the upside if things actually work out as a result.
|
