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英国论文网:British and Dutch GDP:The spread of the cri(16)


If there is a bank solvency problem, even membership in the euro area would
not help. Only the strength of the fiscal authority standing behind the national
banks (and its willingness to put its fiscal capacity in the service of a rescue effort
for the banks) determines the banks’ chances of survival in this case. If there were
a serious banking sector solvency problem in Iceland, then with a banking sector
balance sheet to annual GDP ratio of around 900 percent, it is unlikely that the
fiscal authorities would be able to come up with the necessary capital to restore
solvency to the banking sector.
The required combined internal transfer of resources (now and in the future,
from tax payers and beneficiaries of public spending to the government) and
external transfer of resources (from domestic residents to foreign residents,
through present and future primary external surpluses) could easily overwhelm
the economic and political capacities of the country. Shifting resources from the
non-traded sectors into the traded sectors (exporting and import-competing) will
require a depreciation of the real exchange rate and may well also require a worsening
of the external terms of trade. Both are painful adjustments.
If the solvency gap of the banking system exceeds the unused fiscal capacity of
the authorities, the only choice that remains is that between banking sector insolvency
and sovereign insolvency. The Icelandic government has rightly decided
that its tax payers and the beneficiaries of its public spending programmes (who
will be hard hit in any case) deserve priority over the external and domestic creditors
of the banks (except for the insured depositors).
Conclusions, lessons and others who might be vulnerable
Iceland’s circumstances were extreme, but there are other countries suffering from
milder versions of the same fundamental inconsistent – or at least vulnerable –
quartet:
(1) A small country with (2) a large, internationally exposed banking sector, (3) its
own currency and (4) limited fiscal spare capacity relative to the possible size of
the banking sector solvency gap.
Countries that come to mind are:
• Switzerland,
• Denmark,
• Sweden
and even to some extent the UK, although it is significantly larger than the others
and has a minor-league legacy reserve currency.
Ireland, Belgium, the Netherland and Luxembourg possess the advantage of
having the euro, a global reserve currency, as their national currency. Illiquidity
alone should therefore not become a fatal problem for their banking sectors. But
with limited fiscal spare capacity, their ability to address serious fundamental
banking sector insolvency issues may well be in doubt.
26 The First Global Financial Crisis of the 21st Century Part II


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