Germany has been leading the opposition in the EU to any write-down of troubled euro-zone members' sovereign debt. Instead, it has agreed to establish bailout mechanisms such as the European Financial Stability Facility and the European Financial Stabilisation Mechanism, which can lend up to €500 billion (Dh2.51 trillion) combined, with the IMF providing an additional €250bn.
These are essentially refinancing mechanisms. Heavily indebted euro-zone members can apply to borrow from them at less than the commercial rate, conditional on their committing to ever more drastic fiscal austerity.
Principal and interest on outstanding debt have been left intact. Thus, creditors - mainly German and French banks - are not expected to suffer losses on their existing loans, while borrowers gain more time to "put their houses in order".
That, at least, is the theory.
So far, Greece, Ireland, and Portugal have availed themselves of this facility. In mid-July, Greece's sovereign debt stood at €350bn, or 160 per cent of GDP. The Greek government currently must pay 25 per cent for its 10-year bonds, which are trading at a 50 per cent discount in the secondary market.
In other words, investors are expecting to receive only about half of what they are owed. The hope is that the reduction in borrowing costs on new loans, plus the austerity programmes promised by governments, will enable bond prices to recover to par without the need for the creditor banks to take a hit.
This is pie in the sky. Unless a large part of its debt is forgiven, Greece will not regain creditworthiness.
By most accounts, it is about to default. And the same is true, albeit to a lesser degree, for other heavily indebted sovereigns.
Any credible bailout plan must require creditor banks to accept that they will lose at least half of their money. In the successful Brady Bond plan in 1989, the debtors - Mexico, Argentina, and Brazil - agreed to pay what they could. The banks that had loaned them the money replaced the old debt with new bonds at par value, which averaged 50 per cent of the old bonds, and the US government provided some sweeteners.
It was write-offs and devaluations, not austerity programmes, that allowed bond prices to recover. In the Greek case, creditors have yet to accept the need for write-offs, and European governments have provided them with no incentives to do so.
Germany's opposition to debt forgiveness is thus bad economics, bad politics (except at home) and bad history. In the Treaty of Versailles after the First World War, the victorious Allies insisted Germany should pay for "the cost of the war". They added up the figures, and in 1921 they presented the bill: Germany "owed" the victors £6.6bn (85 per cent of its GDP), payable in 30 annual instalments.
Within a year, Germany had asked for, and obtained, a moratorium. New bond issues, following a big debt write-down in 1924, enabled Germany to borrow the money to resume payments. There then followed a crazy system: Germany borrowed money from the US in order to repay Britain, France, and Belgium, while France and Belgium used a bit of it to pay back Britain, and Britain used more of it to pay back the US.
This whole tangle of debts was finally de facto written off in 1932 in the middle of the global slump. But, until 1980, Germany continued repaying the loans that it had incurred to pay the reparations.
From the start, the economist John Maynard Keynes had been a fierce critic of the reparations policy imposed on Germany. He made three main points: Germany didn't have the capacity to pay were it to regain anything like a normal standard of living; any attempt to force it to reduce its standard of living would produce revolution; and to the extent that Germany was able to increase its exports to pay reparations, this would be at the expense of the recipients' exports. What was needed was cancellation of reparations and inter-Allied war debts as a whole, together with a reconstruction loan to put the shattered European economies back on their feet.
In 1919, Keynes produced a grand plan for comprehensive debt cancellation, plus a new bond issue, guaranteed by the Allied powers, whose proceeds would go to victors and vanquished alike. The Americans, who would have had to provide most of the money, vetoed it.
The point to which Keynes kept returning was that the attempt to extract debt payments over many years would have disastrous social consequences.
Angela Merkel, the German chancellor, would do well to ponder that history.
Robert Skidelsky, a member of the British House of Lords, is professor emeritus of political economy at Warwick University
* Project Syndicate
Tips for job-seekers
- Do not submit your application through the Easy Apply button on LinkedIn. Employers receive between 600 and 800 replies for each job advert on the platform. If you are the right fit for a job, connect to a relevant person in the company on LinkedIn and send them a direct message.
- Make sure you are an exact fit for the job advertised. If you are an HR manager with five years’ experience in retail and the job requires a similar candidate with five years’ experience in consumer, you should apply. But if you have no experience in HR, do not apply for the job.
David Mackenzie, founder of recruitment agency Mackenzie Jones Middle East
Company Profile
Name: Thndr
Started: 2019
Co-founders: Ahmad Hammouda and Seif Amr
Sector: FinTech
Headquarters: Egypt
UAE base: Hub71, Abu Dhabi
Current number of staff: More than 150
Funds raised: $22 million
Three tips from La Perle's performers
1 The kind of water athletes drink is important. Gwilym Hooson, a 28-year-old British performer who is currently recovering from knee surgery, found that out when the company was still in Studio City, training for 12 hours a day. “The physio team was like: ‘Why is everyone getting cramps?’ And then they realised we had to add salt and sugar to the water,” he says.
2 A little chocolate is a good thing. “It’s emergency energy,” says Craig Paul Smith, La Perle’s head coach and former Cirque du Soleil performer, gesturing to an almost-empty open box of mini chocolate bars on his desk backstage.
3 Take chances, says Young, who has worked all over the world, including most recently at Dragone’s show in China. “Every time we go out of our comfort zone, we learn a lot about ourselves,” she says.
500 People from Gaza enter France
115 Special programme for artists
25 Evacuation of injured and sick
More from Neighbourhood Watch:
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
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more from Janine di Giovanni
Tightening the screw on rogue recruiters
The UAE overhauled the procedure to recruit housemaids and domestic workers with a law in 2017 to protect low-income labour from being exploited.
Only recruitment companies authorised by the government are permitted as part of Tadbeer, a network of labour ministry-regulated centres.
A contract must be drawn up for domestic workers, the wages and job offer clearly stating the nature of work.
The contract stating the wages, work entailed and accommodation must be sent to the employee in their home country before they depart for the UAE.
The contract will be signed by the employer and employee when the domestic worker arrives in the UAE.
Only recruitment agencies registered with the ministry can undertake recruitment and employment applications for domestic workers.
Penalties for illegal recruitment in the UAE include fines of up to Dh100,000 and imprisonment
But agents not authorised by the government sidestep the law by illegally getting women into the country on visit visas.
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Our legal consultant
Name: Dr Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
COMPANY PROFILE
Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Total funding: Self funded
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
FIXTURES
Monday, January 28
Iran v Japan, Hazza bin Zayed Stadium (6pm)
Tuesday, January 29
UAEv Qatar, Mohamed Bin Zayed Stadium (6pm)
Friday, February 1
Final, Zayed Sports City Stadium (6pm)
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6.30pm: Al Maktoum Challenge Round-3 Group 1 (PA) | US$95,000 | (Dirt) 2,000m
7.05pm: Meydan Classic Listed (TB) ) | $175,000) | (Turf) 1,600m
7.40pm: Handicap (TB) ) | $135,000 ) | (D) 1,600m
8.15pm: Nad Al Sheba Trophy Group 3 (TB) ) | $300,000) | (T) 2,810m
8.50pm: Curlin Handicap Listed (TB)) | $160,000) | (D) 2,000m
9.25pm: Handicap (TB)) | $175,000) | (T) 1,400m
10pm: Handicap (TB) ) | $135,000 ) | (T) 2,000m
Killing of Qassem Suleimani
OPINIONS ON PALESTINE & ISRAEL
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
UAE currency: the story behind the money in your pockets
Smart words at Make Smart Cool
Make Smart Cool is not your usual festival. Dubbed “edutainment” by organisers Najahi Events, Make Smart Cool aims to inspire its youthful target audience through a mix of interactive presentation by social media influencers and a concert finale featuring Example with DJ Wire. Here are some of the speakers sharing their inspiration and experiences on the night.
Prince Ea
With his social media videos accumulating more half a billion views, the American motivational speaker is hot on the college circuit in the US, with talks that focus on the many ways to generate passion and motivation when it comes to learning.
Khalid Al Ameri
The Emirati columnist and presenter is much loved by local youth, with writings and presentations about education, entrepreneurship and family balance. His lectures on career and personal development are sought after by the education and business sector.
Ben Ouattara
Born to an Ivorian father and German mother, the Dubai-based fitness instructor and motivational speaker is all about conquering fears and insecurities. His talk focuses on the need to gain emotional and physical fitness when facing life’s challenges. As well managing his film production company, Ouattara is one of the official ambassadors of Dubai Expo2020.
Sole survivors
- Cecelia Crocker was on board Northwest Airlines Flight 255 in 1987 when it crashed in Detroit, killing 154 people, including her parents and brother. The plane had hit a light pole on take off
- George Lamson Jr, from Minnesota, was on a Galaxy Airlines flight that crashed in Reno in 1985, killing 68 people. His entire seat was launched out of the plane
- Bahia Bakari, then 12, survived when a Yemenia Airways flight crashed near the Comoros in 2009, killing 152. She was found clinging to wreckage after floating in the ocean for 13 hours.
- Jim Polehinke was the co-pilot and sole survivor of a 2006 Comair flight that crashed in Lexington, Kentucky, killing 49.
Dhadak 2
Director: Shazia Iqbal
Starring: Siddhant Chaturvedi, Triptii Dimri
Rating: 1/5
What can victims do?
Always use only regulated platforms
Stop all transactions and communication on suspicion
Save all evidence (screenshots, chat logs, transaction IDs)
Report to local authorities
Warn others to prevent further harm
Courtesy: Crystal Intelligence
The Cockroach
(Vintage)
Ian McEwan
