IMF: Griekenland en Ierland zullen waarschijnlijk niet in gebreke blijven (en)
Default in today's advanced economies is unnecessary and unlikely and the risk of debt restructuring is currently significantly overestimated, economists from the International Monetary Fund wrote in a report published Wednesday (1 September).
The IMF i tried to downplay the likelihood of a default by some EU member states, while also warning that the debt burden in many wealthy countries may be close to its limits.
"Although the fiscal fundamentals look challenging, current market indicators of default risk seem to reflect some market overreaction," the IMF economists wrote.
According to their assessment, due to the long maturity of public debt in advanced countries at the beginning of the crisis, their debt service is still relatively contained. The means the problem is not the debt burden, but the primary deficit. In eight cases since 1980 when an advanced economy with government debt of at least 60 percent reduced its deficit to zero, none defaulted.
"The political and economic costs stemming from a hypothetical default would not be lower than those incurred under a strategy based solely on fiscal adjustment," says the report.
However, in a separate study examining governmental debt sustainability, the fund's researchers concluded that a number of countries have either very little or no additional fiscal space - the distance between current debt levels and the debt limit beyond which a country's debt becomes further unsustainable.
"In particular, Greece, Italy, Japan, and Portugal appear to have the least fiscal space, with Iceland, Ireland, Spain, the United Kingdom, and the United States also constrained in their degree of fiscal maneuver," the study says.
Although an absence of fiscal space does not mean that a fiscal crisis is imminent or likely, the economists argue it shows the need for credible adjustment plans.
The IMF, together with the EU, provided financial aid to indebted Greece in 2010 amid concerns about its ability to repay past liabilities. Many economists believed that the extent of Greek debt meant the country it is likely to default.
The EU agreed in May to create its own stabilisation mechanism, issuing European bond guarantees to address the mounting sovereign debt crisis.
In May, Citigroup analyst Willem Buiter was quoted as saying by the Wall Street Journal that a Greek debt restructuring was "unavoidable." Either "there will be a Greek default, or the Greek sovereign debt will be restructured 'voluntarily,'" by lengthening the maturities of the debt coming due over the next five years, he said.
Report