This article comes in the wake of the annual meeting of the International Monetary Fund and World Bank this weekend. Government debt, something that has been in the news quite a lot recently, is sure to be one of the major topics addressed at the meeting. The author of this New York Rimes article, Floyd Norris, explains his view about all of the concern over debt levels by examining debt levels throughout Europe for the last couple of years.
Norris comes to the conclusion that the debt level itself does not appear to be that important of a factor in the health of an economy. He cites mainly three countries to back up this statement: Ireland, Germany, and Italy. Despite being the most fiscally conservative before the credit crisis in 2007 Ireland’s economy has been struggling the last few years. Norris does cite several alternative reasons that Ireland has done so poorly – high levels of private debt, the real estate bubble, and having to rescue banks – but he comes to the conclusion that what causes fiscal troubles is not always simple to discern.
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