More on the debt conversion policy in Modest Proposal 4.0

26/07/2013 by

Portuguese readers have returned (see this and this, for the original Q&As)  with two more questions on the Modest Proposal‘s limited debt conversion policy (with which we believe the Eurozone’s debt crisis could be dealt a decisive blow). 

I do not understand quite well the “moral “ difference between mutualizing the debt above Maastricht rule and mutualize the debt only up to the 60%?

Let me build up my answer in three steps: 

(a)  Each of our member-states had the ‘right’ to run up debt up to 60% of GDP – I call this Maastricht Compliant Debt (MCD).

(b) If the ECB helps with the servicing of part of one’s debt, it is a form of assistance or aid.

(c) It is much easier to justify politically and even morally help in servicing a member-state’s MDC (since the member-state had the ‘right’ to that debt) than in servicing part of the debt that was somewhat ‘illicit’, ‘unapproved’.

The debt reconversion through the ECB will be for all Eurozone members? Or only for those who have excessive debt (above 60%)?

For any member-state of the Eurozone that wants it. Without any pre-approval by the Eurogroup, the troika or indeed any conditionality. By the same token, if any member-state does not want to be part of it, it does not need to be.

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