Finanz und Wirtschaft, June 5, 2021. PDF.
ifo Schnelldienst 4/2021, April 14, 2021. PDF.
Was Schuldengrenzen aus politökonomischer Sicht besonders attraktiv erscheinen lässt – ihre vermeintliche Einfachheit und Klarheit – birgt also auch Risiken. Es führt dazu, dass Politiker und ihre Wähler die Solidität der Staatsfinanzen über Gebühr an expliziten Bruttoschulden messen. Was aber zählt, wenn es um unerwünschte Umverteilung zulasten künftiger Generationen geht, ist staatliches Nettovermögen in einer umfassenden Gesamtschau.
In its recent Fiscal Monitor, the IMF provides estimates of public sector net worth. See also this previous post.
CEPR Discussion Paper 12755, February 2018. PDF. (Personal copy.)
This paper reviews theoretical results on financial policy. We use basic accounting identities to illustrate relations between gross assets and liabilities, net debt positions and the appropriation of (primary) budget surplus funds. We then discuss Ramsey policies, answering the question how a committed government may use financial instruments to pursue its objectives. Finally, we discuss additional roles for financial policy that arise as a consequence of political frictions, in particular lack of commitment.
An interesting conference organized by CESifo and Japonica Partners brought together accountants, lawyers and economists with interests in public finance and sovereign debt. Discussions about Greece took center stage.
According to estimates based on the accounting standards IPSAS, ESA 2010 or SNA 2008, Greece’s gross government debt quota at the end of 2013 amounted to roughly 70% and its net debt quota didn’t exceed 20%. The debt numbers give the present values of the contractual payments, discounted at the market yields at the time the debt was issued or restructured. The estimate of the gross debt position closely resembles estimates of the market value of Greek government debt by economists.
The claim that Greece urgently needs debt relief received only limited support, and least from people who worked for and with the Greek government. My reading was that any need for near term debt relief is mostly of a political nature.
Some relevant links:
20.221: Debt operations can be particularly important for the general government sector, as they often serve as a means for government to provide economic aid to other units. The recording of these operations is covered in chapter 5. The general principle for any cancellation or assumption of debt of a unit by another unit, by mutual agreement is to recognise that there is a voluntary transfer of wealth between the two units. This means that the counterpart transaction of the liability assumed or of the claim cancelled is a capital transfer. No flow of money is usually observed, this may be characterised as a capital transfer in kind.
20.236: Debt restructuring is an agreement to alter the terms and conditions for servicing an existing debt, usually on more favourable terms for the debtor. The debt instrument that is being restructured is considered to be extinguished and replaced by a new debt instrument with the new terms and conditions. If there is a difference in value between the extinguished debt instrument and the new debt instrument, it is a type of debt cancellation and a capital transfer is necessary to account for the difference.
22.109–110: Debt rescheduling (or refinancing) is an agreement to alter the terms and conditions for servicing an existing debt, usually on more favourable terms for the debtor. Debt rescheduling involves rearrangements on the same type of instrument, with the same principal value and the same creditor as with the old debt. Refinancing entails a different debt instrument, generally at a different value and may be with a creditor different than that from the old debt. Under both arrangements, the debt instrument that is being rescheduled is considered to be extinguished and replaced by a new debt instrument with the new terms and conditions. If there is a difference in value between the extinguished debt instrument and the new debt instrument, part is a type of debt forgiveness by government and a capital transfer is necessary to account for the difference.
Elva Bova, Robert Dippelsman, Kara Rideout and Andrea Schaechter review the evidence on governments’ non-financial assets in an IMF working paper. An excerpt from the abstract:
… state-owned nonfinancial assets across 32 economies, with particular focus on the advanced G-20 economies. We find that reported nonfinancial assets comprise mostly structures (such as roads and buildings) and,when valued, land. These assets have increased over time, mostly due to higher property and commodity prices, and are, in large part, owned by subnational governments. Many countries have launched reforms with a view to streamlining public administrations, but receipts and savings have been rather small so far. Governments tend to consider relatively small sets of assets to be disposable …