An economy that purchases more goods from abroad than it supplies to other economies within a longer period of time sooner or later becomes insolvent, especially if it does not own enough profitable assets abroad, such as the U.S., Switzerland or Germany. This is accelerated by the withdrawal of foreign investors’ capital in that state. – In October 2008, in the wake of the subprime crisis, which fanned out into a global financial crisis, Iceland went into national bankruptcy; the International Monetary Fund granted the country a loan of $2 billion. USD to avert the most disastrous effects (famine). This also affected German investors who had invested their money with the Icelandic Kaupthing Bank, which had gone bankrupt. – At the beginning of 2010, Greece, which is part of the euro area, was approaching national bankruptcy. Aid measures by the EU and the International Monetary Fund were able to prevent the worst. – What is disputed is whether a member of the European Monetary Union can be allowed to go into state bankruptcy, but then also with the participation of private creditors. The majority of economists are in favor of this in order to strengthen the fiscal responsibility of each member. Almost all policymakers seek to prevent such a possibility by all means. – See buyouts, central bank, bail-out, bank bailout, reverse, bank bailout law, blame game, European Monetary Union, fundamental error, ECB fall from grace, Greek crisis, Icelandic bank trap, moral hazard, Plan C, bailout, risk ranking, feedback mechanism, debt club, debt drug, semester, European, solidarity, financial, solvency, blocked account, sovereign debt, effects, Stability and Growth Pact, fundamental error, southern front, too big to save principle, transfer union, contract compliance, trust. – Cf. BaFin Annual Report 2008, p. 122 (Kaupthing Bank’s insolvency and the consequences for depositors), pp. 211 f. (investor complaints in the wake of the Kaupthing bankruptcy), BaFin Annual Report 2009 (German depositors of Kaupthing Bank are compensated).
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
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