消息人士：政治因素妨碍中国援助欧盟

choi

(1) 消息人士：政治因素妨碍中国援助欧盟. BBC Chinese, Nov 11, 2011.
http://www.bbc.co.uk/zhongwen/si ... 1111_china_eu.shtml

Note: The report cites

Benjamin Kang Lim and Nick Edwards, Exclusive - Politics Stymie China's EU Aid Offer. Reuters, Nov 11, 2011.
http://www.reuters.com/article/2 ... USTRE7A26SO20111111

(2) Paul Krugman, The legends of the Fail; What didn't go wrong in Europe? New York Times, Nov 11, 2011.
http://www.nytimes.com/2011/11/1 ... -fail.html?ref=euro

Three consecutive paragraphs:

"You hear that claim all the time. America, we’re told, had better slash spending right away or we’ll end up like Greece or Italy. Again, however, the facts tell a different story.

"First, if you look around the world you see that the big determining factor for interest rates isn’t the level of government debt but whether a government borrows in its own currency. Japan is much more deeply in debt than Italy, but the interest rate on long-term Japanese bonds is only about 1 percent to Italy’s 7 percent. Britain’s fiscal prospects look worse than Spain’s, but Britain can borrow at just a bit over 2 percent, while Spain is paying almost 6 percent.

"What has happened, it turns out, is that by going on the euro, Spain and Italy in effect reduced themselves to the status of third-world countries that have to borrow in someone else’s currency, with all the loss of flexibility that implies. In particular, since euro-area countries can’t print money even in an emergency, they’re subject to funding disruptions in a way that nations that kept their own currencies aren’t — and the result is what you see right now. America, which borrows in dollars, doesn’t have that problem.

My comment:
(a) There is no need to read the rest.
(b) I am unsure if Dr Krugman is correct in this point. Japan has for the most part borrowed domestically, from its rich citizens, so naturally its debt was denominated principally in yen. Taiwan used to borrow in US dollar (it no longer does, having reently repaid all foreign debt). How can Taiwan borrow in Taiwan dollar, when it borrowed abroad? (Only Taiwan can print Taiwan dollar. If it kept printing, the certain outcome would be inflation. That is why it borrowd abroad.)