Column Wim Boonstra in Financieele Dagblad 24 april 2011
Column Wim Boonstra in Financieele Dagblad 7 april 2011
The economic costs of sovereign default, as estimated by scholars, are found to be less drastic than most believe possible. The political costs of default, on the other hand, are non-negligible.
The world is littered with financial crises, yet we seem surprised every time they occur. Against this backdrop, we take a closer look at the financial crises since 1800 to see whether we can draw some lessons for the future.
Long-standing concerns about the sustainability of US fiscal imbalances have finally led to the first ‘negative outlook’ for the AAA-rating of US sovereign debt by S&P.
After the dismal failures of the financial markets to correctly price sovereign risk before the crisis, one must be aware that they can still over-or underprice sovereign risk in some countries.
Cameroon performs well on almost all macroeconomic indicators: inflation is low, the fiscal and current accounts are almost in balance and debt levels are sustainable. Nonetheless, GDP growth is low at 2.8% (2010).
Serbia’s economy is still weak as it posts twin deficits. The balance of payments position is weak as the continuously large current account deficits require debt financing. Even so, Serbia’s external position has improved since the nadir during the global financial crisis in 2008.