Annals of the University of Oradea: Economic Science (Jul 2015)
SOME ASPECTS CONCERNING SOVEREIGN DEBT AND THE RELATIVITY OF INDEBTEDNESS INDICATORS
Abstract
For quite a while, the economic world was concerned more and more about sovereign debt. Taking a brief look at economic history, we see that we are not dealing with anything new. Episodes in which states have entered into default occurred, even centuries ago. Moments like the one where Edward III refused to pay the debt to Italian bankers, the Mexican default of August 1982 or the Argentine one back in 2001, aiming at nearly 100 billion dollars, are well known. The current discussion about sovereign debt started with the so-called sovereign debt crisis, which has in the foreground the problem of the Greek state. In 2010 it became acute, Greece being unable to honor its external obligations. It took a strong intervention, supported internationally mainly by the European Union (and also the IMF), but the situation is not resolved even today. This crisis, which we would put on the account of the governance inconsistency and errors, starting with the unprepared entry in the European Union and hasty adoption of the Euro, and continuing with the serious fiscal disorder in the economy, put in difficulty even the single European currency and the economic and monetary union.Shortly after the start of the Greek crisis, which had as a "catalyst" the violent and pro-cyclical reaction of rating agencies, we found that the problem is much deeper, some other countries (the so-called "PIIGS", for example) being affected by massive indebtedness. In this context, the construction of indicators, of alert thresholds and “early warning” mechanisms is an important gain for policy-makers, as well as for the various economic operators. The study of sovereign debt can take many forms; on one hand, using data covering a long period, we may create models containing key indicators: sovereign debt, GDP, inflation, foreign trade, economic growth. Assumptions about the relationship between variables and their testing will be done as a second phase. On the other hand, the analysis may be very relevant by just highlighting the important elements of the recent sovereign debt dynamics, often ignored, both by specialists and governments. It is what we propose in this short study, along with a more nuanced definition of sovereign debt sustainability.
