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If Wolfgang Münchau is right, is it not better for Italy to default and get over with it?

Monday, April 7, 2014 16:56

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Sir, Wolfgang Münchau writes that “no matter what Mr Renzi achieves [Italy] would be headed for certain default if the eurozone’s future inflation rate were to fall from a previous average of 2 per cent to 1 percent”, “Europe’s new boys face a tough fight on austerity”, April 7.

If Italy defaulting or not depends on Europe producing inflation is true, which I hope it is not, since it seems to convey the bad message that Italians are not the masters of their own future, would it not be better for Italy to default, clear the air, and start afresh? I mean this because arguing that Italy needs inflation to repay its debt, is to say that Italy will actually, de facto, default, through inflation, in real terms, on all those holding Italian debt.

And I also say these because Münchau writes that he “fails to see how the alternative can be made to work” that of a “primary surplus – before interest payments –of at least 5 percent on average for 20 years”.

Source: http://teawithft.blogspot.com/2014/04/if-wolfgang-munchau-is-right-is-it-not.html

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