Leaving aside all discussion of morality, if these nations do default on their loans, it is going to be very difficult for anyone to loan them money at reasonable prices. Thus they will be forced to balance their budgets for the foreseeable future. To do this they will have to commit to something like austerity.
It will also have crippled the banking sector of the european economy leading to a credit crunch. This crunch will depress growth throughout europe. Thus default will have all the bad features of austerity, just spread throughout Europe rather than concentrated in the PIIGS.
You don’t think that by not repaying the capital at the loaners convenience, at a rate more in accord with ability, and also not repaying the insane interest demands, quite an amount of domestically generated tax revenue might suddenly become available?
The earth opens up and the human race is sucked into an unimaginable living hell.
Or.
The owners of capital take a hit, possibly even - heaven forbid - related to the level of risk they took in deciding the interest rate to charge on the loans, the working classes in the afflicted countries are spared, there is sufficient to invest in growth, and the world … somehow continues.
Evidently the countries themselves believ they need potential capital flows to stay solvent. This should come as no surprise once you realize that a collapse of government and national bank credit would essentially crumple all trade like an old cola can.
I think the best bet for European nations to generate growth is to learn from and emulate those other European nations which are doing it best: Germany and Sweden. Neither of those have used or are now advocating running up larger deficits to generate growth.
I meant that the country was on a sustainable growth path five years after the near melt down and subsequent harsh austerity program of the early 90s. I.e., in mid 90s. It lasted until the financial crisis. Denmark remains one of the better functioning economies. Deficit has been reduced below the EU required 3% (to 1.8%), debt (@ 40%) is still below the required 60%, growth is still a problem, but at least positive, unemployment stabilized at around 6%. But everybody agrees - government and opposition - that the reforms that have been carried through the last few years will only fix the economy until 2020, and further welfare trimming will be necessary for it to become long-term sustainable once again. Some of these will be voted through over this summer.
Lenders would not want to lend them any more money for some period, and they’d have to balance their budget immediately rather than over five or ten years. Which would spell austerity on a whole other scale. Another consequence would be that the many institutions that hold the debt would see their holding wiped out. That spells trouble for a whole lot of people, from pension funds to even universities.
Might still be the best alternative for a place like Greece.
Well imports, probably.
There really is no such thing as “the countries”; there is the political class, there is the owners of capital who influence the political class, and there is the general population on whom the apparent ‘honour’ - and burden - of repayment entirely rests.
The owners of the capital are largely pension funds and some national funds (like the Norwegian oil funds), and the beneficiaries of the deficit spending over the years have mainly been the common people as they went to finance increased welfare like early retirement and such. The owners of the capital is you. As for the worthless politicians that have driven their nations to such disastrous ends. Quarter them, and put their heads on a pikes for future note.
That was proven to not be the case in the Greek renegotiation, so I’d like a link to demonstrate pension fund exposure to Sovereign debt?
I suppose you could augment fare revenues with advertising, and if you play it right, eventually income from commercial property near the stations.