The Greek crisis has created fears of contagion in other countries of Europe, notably in Portugal and Spain. Unless it is resolved quickly and effectively, the spread will be more severe for it could affect other countries inside and outside of Europe. A growing consensus among international observers is that, despite a massive (€110bn) bailout package from the EU and the IMF in exchange for fiscal austerity measures, public debt restructuring in Greece will not be avoided.
Let’s assume that Obama’s stimulus plan works, namely, that this year’s exorbitant budget deficit provokes an economic recovery of such magnitude that, five to ten years from now, the public debt to GDP ratio stabilizes at 65-70% (from 40% last year) without a major increase in US inflation. Even then, the government will have to […]