2011/04/18

Restructuring state debt

Lars Feld: Restructuring state debt is a fundamentally sensible thing to do. Making private creditors partially liable in the case of national bankruptcies provides incentives to everyone involved: It encourages banks to be less lavish about lending money. It encourages debtors to pay off their debts. And it encourages less deeply indebted countries to continue responsibly managing their budgets.
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Our current problems stem from the fact that banks -- particularly those in Germany and France -- wouldn't be able to cope with a massive restructuring of state debt. That's why we are rescuing heavily indebted countries. Restructuring the banking sector is just as urgent.
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I advocate pragmatic economic policies. I think that we need less state regulation in many areas. But, when it comes to the financial sector, we can't make it without state intervention. spiegel

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