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Eurogroup Republic of Malta Represented by Adrià Marín Torrent

Topic A: Proposals for debt restructuring programs for any indebted Eurogroup country.

Europe has a serious problem with debt. For years, several countries have accumulated unsustainable public debt under the belief that the economic growth experienced until 2007 would last forever. Now, with that same economic growth stagnated for years, it is evident that those countries will not be able to pay to their creditors, and, furthermore, that debt burden will in turn slow down their economic recovery. This vicious circle has to stop, and the only way to do it is trough a well planed restructure of their debts. Debt restructuring, however, is very polemic. It is logical that the lower-debt countries, like us Malta, refuse to pay for the highly indebted countries. It is imperative then to come up with a restructuring plan that allows for the necessary restructuring of the debt, and at the same time does not involve excessive transfers between states. The called PADRE plan (Politically Acceptable Debt Restructuring in the Eurozone), elaborated by the CEPR and the International Center for Monetary and Banking Studies (ICMB), addresses correctly most of this necessities.

The plan involves an agency, the European Central Bank, that acquires at face value a share of existing public debts and swaps them into zero-interest perpetuities. In order to do so, the agency borrows on the financial markets the amount needed to acquire the debts (this is where the ine...