"Carmen Reinhart and Kenneth Rogoff recently published a notable IMF working paper (13/266) entitled ‘Financial and Sovereign Debt Crises: Some lessons learned and those forgotten’ (December 2013). Their overarching claim is that the advanced economies are wrong to pretend that the present levels of debt can be sustained by means of fiscal austerity and without debt restructuring, sustained inflation or a combination of the two. This is a sensible argument, well grounded on empirical and historical evidence, that governments would be wise to internalise.
However, while the general thrust of the Reinhart and Rogoff paper is indeed reasonable and in principle useful, their discussion of Eurozone debt crisis is founded on a factual error that, since 2010, has been underpinning erroneous policy responses to the Euro Crisis."
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