MergerMarket: Burgeoning Sovereign Debt Could Sink Global Economic Stability

The Consequences of Massive State Intervention are Bound to Impede the Recovery and Further Redefine the Geo-economic Equilibrium

MergerMarketDr. Alexander Mirtchev assesses the implications for government intervention in the banking system in an interview with Mergermarket, a Financial Times company. He notes that the crisis which has led governments to accept the transfer of private sector debt onto state balance sheets exposes both developed and developing economies to sovereign debt and deficit imbalances. Such transfers are likely to have far-reaching repercussions, deepening some economies’ exposure to the impact of the financial crisis and possibly prolonging the advent of recovery, ultimately threatening some of the pillars of global economic security. He discusses the need to look beyond the immediate short-term pressures, and devise a broader policy response that would address the long-term needs of greater productivity, competitiveness and growth. Strategies should take into account the interdependency, engendered by the truly global nature of today’s financial system, as well as the unintended consequences of large-scale government intervention in the markets.