A highly indebted member of a monetary union becomes insolvent, triggering a crisis and a currenry swing. – In 1999, the governor of the Brazilian province of Minhas Gerais declared that the province’s debt could no longer be serviced. The reason was that provinces could borrow in foreign currency without macroeconomic restrictions. The moratorium immediately led to a flight of capital from the Brazilian real; the latter had to be devalued by forty percent. The national economy then lurched into a severe economic and social crisis that lasted for years. – This experience was not the least decisive factor in supporting Greece, which was the first eurozone member to face sovereign default. – See crash, Currenry swing, deficit tilt, Greek crisis, Irish crisis, control account, Prague pronouncement, provincial bond, sovereign default, sovereign debt(s), Stability and Growth Pact, debt, debt stimulus, debt ratio.
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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