If the European crisis has shown us anything, it, aos That, on a Certain Point, private and public debt are indistinguishable.
What this MEANS WHO Is that investors have a Focused Measures of sovereign indebtedness in weighing the riskiness of, Äúrisk free, AU, yields are missing the full story.
In Greece, the massive Burden of Domestic Debt threatened Thurs Bring Down the Economy Not Just Because it threatened Thurs squeeze the Greek Taxpayer Dry (the government were ever Thurs Thurs Manage enforce ITS Tax Laws), But Also Because Domestic Banks were holding a massive supply That cloud of debt. A sovereign default Would have wiped out the Greek Banks, AO assets, Crushing the countryside, aos Financial Sector.
In Ireland, the problem worked on the other way around. When Ireland, aos Banks were threatened by Depositor runs DURING the early days of the credit crunch, the government stepped in to Bust the sector, aos Liabilities. A Huge Burden of private-sector debt Suddenly Irish became public.
Many commentators argue HAD Ireland Not That made this promise, the country Would be much better in the Straits. Bank bondholders have HAD Thurs Would Take a hit, leaving the Irish Taxpayer Relatively unscathed. As it is, Ireland faces years of crippling austerity.
This, I Suspect, is too simplistic an Interpretation. Even a neatly Arranged Liquidation of the Irish banking sector have Proven Would Deeply damaging to the economy. True, more of the pain Would Have Been Distributed among Creditors, not least German, British and French Banks. But Creditors Would have demanded Higher yields from Ireland, aos private sector in Compensation for past losses and rising risk. The interest rate paid by the Irish government Might not have rocketed.But Would it have done a private-sector debt. The result Would Have Been The Same Property Market Collapse That, aos Currently holed the Irish economy with a surge in the ITS conséquent on unemployment and rise in public-sector deficits.
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