'..Economists are notoriously inept at understanding how balance sheets function in a dynamic system, and it is precisely for this reason that we haven’t put the resolution of the European debt crisis at the center of the debate..'<blockquote>'Monetary policy is as much about politics as it is economics. It is about some of the ways in which wealth is created, allocated, and retained. Debt restructuring involves allocating wealth in the most efficient way. It does necessarily not mean, however, defaulting on payments. The only goal of a debt restructuring is to reduce the uncertainty associated with the resolution of the excessive and growing debt burden. There are many ways to do so, and in many cases they require significant debt forgiveness, but pretending that all will be fine if we only grit our teeth and wait longer has almost never turned out to be true.
For now I would argue that the biggest constraint to the EU’s survival is debt. Economists are notoriously inept at understanding how balance sheets function in a dynamic system, and it is precisely for this reason that we haven’t put the resolution of the European debt crisis at the center of the debate. But Europe will not grow, the reforms will not “work”, and unemployment will not drop until the costs of the excessive debt burdens are addressed.'
- Michael Pettis,
When do we decide that Europe must restructure much of its debt?, February 25, 2015</blockquote>
'..the debt should be cut.'<blockquote>'The IMF can only support countries whose debt is judged as sustainable, so if it is judged as unable to make payments and continue functioning then the debt should be cut.'
-
EU, IMF disagreement holding up debt deal - Greece, May 5, 2015</blockquote>
Context<blockquote>
(Spain, Greece, Italy) - 'Significant debt forgiveness doesn’t mean equally significant losses for creditors.'</blockquote>