Orderly reduction of debt levels is feasible

Irwin Stelzer should gloat a bit less (Wall Street Journal), there is no reason why the debt mountain cannot be reduced in an orderly fashion. Of course, what has been built over several decades can only be reduced in a slow and systematic way. This means that the 'freebies' distributed by the politicians will have to be withdrawn. But people survived without them in the past and with leadership and good will they will survive perfectly well. The army of 'invalids' living on state benefits in Britain for example has swollen dramatically since the early 1980s (yes, it started under the 'Iron' Lady!).

Unfortunately the economic debate is dominated by those seeking to profit from the implosion of the economies in (Southern) Europe and those trying to make their living by serving them. This unhealthy symbiotic relationship between Investors (especially Hedge Funds) and their 'advisors' in sell-side investment banks means that they are only happy if there is 'volatility' in the markets, the more the better for their business (and out-sized profits at the expense of the wider investment public and the taxpayers in general).

A few numbers to illustrate the feasibility of an orderly return to stable fiscal regimes: Greece with about Euro 300 billion in debt has to pay around 15 billion in interest with an interest rate around 5 per cent. To bring debt down to a more reasonable 150 billion over a period of 30 years would mean a net repayment of 5 billion. This total of 20 billion Euros distributed over a population of 11 million may appear to be a heavy burden but it is only 6 per cent of GDP. Now we all know that spending is more fun than saving but to say that this is not possible is not a statement of fact.

The will may be lacking but like in personal life, is it really too much to cut spending by 6 per cent? At least some part of this money goes to internal creditors who will spend the money and thus stimulate the economy. Money does not disappear in a black hole! Repayment will also mean that interest rates will be on a downward trajectory or remain low. And repayment of foreign creditors will allow them to spend more and stimulate the whole European Economy.