EU StatisticsAmy comment :A liquidity crisis is a cash flow problem- a country or firm is unable to cover current liabilities quick enough. Assets are greater than debts but most the assets are illiquid and can not meet payback requirements. To be insolvent is much more serious and occurs when a country or firm has debts that it can not pay through it's assets, even if they could sell them all, it would not be enough. Mr Munchau thinks it is a solvency crisis and that Eurozone governments are treating it as a liquidity crisis. Austerity, deficit cutting by lowering spending by reducing the amount of benefits and public services provided, will have a negative effect on growth in 2013, according to Munchau. Portugal is making cuts in subsistence payments to the very poor to meet their targets. This brings us to the austerity slide in the EU stats powerpoint...negative consequences of austerity..How will these very poor people who depend on help from the government survive, much less prosper and contribute to the economic recovery of the nation? They won't!Prof comment :Excellent comment! Note that not all countries in the eurozone have a solvency problem; in any case how would you solve a solvency problem?
HYPERLINK "javascript:Message.refreshTree();" EU Statistics Amy comment : A liquidity crisis is a cash flow problem- a country or firm is unable to cover current liabilities quick enough. Assets are greater than debts but most the assets are illiquid and can not meet payback requirements. To be insolvent is much more serious and occurs when a country or firm has debts that it can not pay through it's assets, even if they could sell them all, it would not be enough. Mr Munchau thinks it is a solvency crisis and that Eurozone governments are treating it as a liquidity crisis. Austerity, deficit cutting by lowering spending by reducing the amount of benefits and public services provided, will have a negative effect on growth in 2013, according to Munchau. Portugal is making cuts in subsistence payments to the very poor to meet their targets. This brings us to the austerity slide in the EU stats powerpoint...negative consequences of austerity..How will these very poor people who depend on help from the government survive, much less prosper and contribute to the economic recovery of the nation? They won't! Prof comment : Excellent comment! Note that not all countries in the eurozone have a solvency problem; in any case how would you solve a solvency problem?
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