But, despite some transitional market turbulence, the overall effect will likely be positive. The beneficial effect on the risk return options available to investors savers (including pension funds) will outweigh the higher cost of debt indeed, an important subset of growth engines in the tradable sector is not dependent on low cost debt.

Greece s recent financing package, overseen by the Troika, gave the country much less debt relief than it needed. But, even with significantly more public debt relief, Greece could not return to growth without rapidly restoring competitiveness.

Options for lower debt burdens on Governments of heavily indebted developing countries include debt cancellation and debt swaps for sustainable development.

Proposals on debt restructuring frameworks

Group of 77 (on debt)

This pattern can be only partly repeated in the eurozone, where both debt socialization and a return to normal risk assessment appear more difficult.

How to Default on Sovereign Debt

Most economists failed to foresee the economic dynamics that actually led to the crisis, because they failed to pay enough attention to the rapid increase in US total debt. Instead, they focused exclusively on US foreign debt, ignoring household debt (mortgage and consumer debt), public debt, business debt, and financial debt.

To address the debt burden problem, many African countries at first resorted to repeated debt rescheduling which focused on debt service flows, resulting in steadily increasing debt stocks and related service payments.

According to their published forecasts, they believed that, by cutting wages and accepting other austerity measures, Greek exports would increase and the economy would quickly return to growth. They also believed that the first debt restructuring would lead to debt sustainability.

His delegation therefore supported the application of the debt burden adjustment based on the debt stock approach.

Group of 77 (core group on debt)

Group of 77 (core group on debt)

Debt reduction, either through stock of debt reduction or debt service reduction based on a concessional rescheduling, will continue to be considered only in exceptional cases.

(c) An allocation to emerging market debt may be an optimal method of achieving exposure to the potentially high risk high return profile of developing countries

Thus, the Paris Club's Evian approach relies on IMF Debt Sustainability Analysis for determining the terms of debt reschedulings.

33 UNCTAD is implementing a project on development strategy and debt sustainability, which also integrates aspects of debt management.

Only mutualization of debt issuance can generate the low (risk free) interest rate needed to enable these countries to put their public finances on a sound footing and lay the basis for a return to economic growth. All eurozone countries should, therefore, finance debt by issuing bonds that would be jointly guaranteed by all member states.

We heard a strong welcome for recent progress on aid and debt, although many members expect further action on debt, more quickly and in more countries.

There have been many proposals on debt restructuring mechanisms.

Oral statements in plenary on CTT and debt sustainability.

Oral statements on global governance and debt and written statement on trade.

Fiscal consolidation in the Mediterranean countries might just do the trick, and allow at great cost a return to normal financing arrangements. But if market nervousness persists and interest rates remain high relative to rates for secure German debt, the debt burden will rapidly become unsustainable.

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Debt sustainability and debt relief

The low return on investment and slow export growth in landlocked developing countries have been key causes of the build up of an unsustainable external debt with an external debt to export ratio of 221 per cent and an external debt to GDP ratio of 67 per cent in 2003 against ratios of 106 per cent and 36 per cent, respectively, for developing countries as a whole in the same year (see tables 3 and 4).

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Indeed, this financial repression tax on domestic savers remains a huge opaque source of funding for India s debt ridden government. It also prevents funds from being channeled to private sector investment projects with far higher rates of return than the government can offer.

In some countries Argentina, Ecuador and the Russian Federation the debt crisis led to a suspension of payments or defaults on debt service.

The US is running an 800 billion annual trade deficit in traditional goods and services. Yet, because Americans consistently earn a higher return on their investments abroad than foreigners earn on their US investments, US debt is rising at perhaps only half the rate that it might otherwise.

The Group of Eight initiatives on debt relief and on Africa are important contributions.

In these cases, debt restructurings produced a haircut on exchanged bonds.

In December 2001, the Government declared default on its external debt.

Group of 77 (core groups on debt and international financial systems)

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Lower interest rates on loans are available in capital markets to borrowers who have ample debt service coverage , which is defined as total revenues available for debt service as a percentage of the required debt service.

Besides these cost savings, the active use of DMFAS in debt offices ensures that countries have an up to date database on debt, allowing more effective debt management and better preparation for loan and rescheduling negotiations.

We welcome the increase in debt relief, including debt cancellation, for many of the most highly indebted poor countries, as well as the renewed focus on Africa and on HIV AIDS.

Governments do not tax the return on equity less than debt interest, and lenders do not sufficiently honor the benefits of high equity with lower interest rates, owing to a lack of information about the true repayment probability. This is why equity capital held by financial institutions typically is more than twice as expensive as debt capital and why these institutions try to minimize its use.

Doing so would reduce the debt and tax burdens on future generations, while crucially limiting the risks of much higher inflation in the nearer term. Moreover, a higher inflation target and the restoration of credibility that it would imply would enable central banks to return to a lower inflation target without creating a recession once debt levels had been reduced and aggregate demand had recovered.