Spain not only didn't have a public debt problem, it was running a surplus on a debt of 60%. And Spain understood the risk of the asset bubble and tried to stop bad property lending by reforming its banks - no help at all, since German banks stepped in to provide inadequately covered loans to finance the bubble... Now PIIGS countries must not default so that foolish non-PIIGS banks don't have their balance sheets destroyed.
The simple morality tale that many try to weave does not survive a closer look at events.
While I agree with your characterisation of the problem, devaluation is no panacea since (i) it tends to cause inflation, (ii) it only works as advertised if there is adequate global demand, and (iii) the devaluation is equivalent to a default from the point of view of creditors. I lean towards some sort of Eurobond supported by an intra-Eurozone investment programme to support trade imbalances.
Finally PIIGS is an awful acronym, who came up with it? PIGIS would be much better, and could be pronounced "piggies".
Spain not only didn't have a public debt problem, it was running a surplus on a debt of 60%. And Spain understood the risk of the asset bubble and tried to stop bad property lending by reforming its banks - no help at all, since German banks stepped in to provide inadequately covered loans to finance the bubble... Now PIIGS countries must not default so that foolish non-PIIGS banks don't have their balance sheets destroyed.
The simple morality tale that many try to weave does not survive a closer look at events.
While I agree with your characterisation of the problem, devaluation is no panacea since (i) it tends to cause inflation, (ii) it only works as advertised if there is adequate global demand, and (iii) the devaluation is equivalent to a default from the point of view of creditors. I lean towards some sort of Eurobond supported by an intra-Eurozone investment programme to support trade imbalances.
Finally PIIGS is an awful acronym, who came up with it? PIGIS would be much better, and could be pronounced "piggies".