Martin Wolf claims to have read (and, we guess, understood) all 68 pages of Willem Buiter’s recent tome, Sovereign Debt Problems in Advanced Industrial Countries.
But there was evidence on Wednesday that Buiter’s move from academia to commerce, as chief economist at Citigroup, has caused the former LSE professor to rein in his famously verbose prose.
In fact his latest Global Economics Flash, tackling the Greek bailout package, runs to just eight pages.
Luckily, he’s just as blunt in his new job. Extract:
The fundamental point is that at market interest rates or at the interest rates offered by the EA partners, the Greek sovereign faces not just illiquidity, but insolvency. Burden sharing with the creditors is the normal solution to a sovereign insolvency problem. We see no reason why Greece should be an exception. The creditors were happy enough to cash in on the sovereign risk premia that made the Greek sovereign debt attractive as long as they believed that there really was no sovereign risk. There was and there is, and that risk is now coming home. Those who expect to earn risk premia without bearing the risk, should it materialize, are bound to be disappointed and should not be in charge of other people’s money.
Plenty more in the usual place.
Alternatively, just read Wolf.
Related links:
Greece and the eurozone: what next? – FT Alphaville
Merkel’s calls for ‘orderly insolvencies’ threaten more disorder – FT Alphaville
Bail-out fails to calm eurozone debt crisis fears – FT
Europe’s choice is to integrate or disintegrate – Wolfgang Münchau / FT