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Thread: CPEC and Developments

  1. #136
    Turbanator Senior Contributor Double Edge's Avatar
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    Lijian Zhao, China's Deputy chief of mission, Pakistan

    Farukh Saleem, Columnist, The News, Pakistan....

    Going through the comments, one stands out, typical PTI-sh propaganda to attack the ruling party. No moral courage to appreciate development

    Last edited by Double Edge; 20 Sep 17, at 14:49.

  2. #137
    Turbanator Senior Contributor Double Edge's Avatar
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    Mainstreaming terrorists before they have disarmed...

    Mainstreaming of terror outfits | Daily Times | Sept 24 2017

    There are no signs that groups like JuD, LeT and JeM have been disarmed

    The recent by-election in Lahore’s National Assembly constituency NA 120 has ignited an important debate about the counter violent extremism, radicalisation and terrorism in the country. For many, the candidates fielded by Jamaat-ud-Dawa (JuD) and Lashkar-e-Taiba (LeT) linked Milli Muslim League (MML) and Tehreek-e-Labbaik Pakistan (TLP), led by Barelvi extremists was alarming.

    But there is a far greater number of ‘experts’ and commentators, belonging to even the liberal quarters supporting it as the best strategy to ‘eliminate’ terrorism by allowing them in the political and social mainstream if they renounce violence.

    The proponents of ‘mainstreaming’ are quoting Northern Ireland’s IRA/Sinn Fein duo and a more recent process in Afghanistan wherein a former militant warlord Gulbadin Hekmatyar was allowed to join politics. The narrative, howsoever it seems appealing, is thoroughly misleading to say the least. Talking about the Afghan process, it was led by the political leadership of that country with transparency and openness to the extent that several drafts of the ‘peace agreement’ were signed with the militant group, the text of which appeared in media and was commented upon by a range of commentators, before finally declaring the group ‘former militants’.

    Also, Afghanistan’s scenario is absolutely sui generis, with a history of warlordism, which was so intertwined with the political fabric of the country that it still is quite difficult to completely isolate warlords from their tribal areas of political influence. Almost the entire parliament comprises these former (or current) warlords. In this backdrop, it is a sensible approach to bring the rogue warlords to the folds of legitimate political activity, to prevent them from joining or to isolate them from their existing alliances with domestic militants and terrorists actively engaged in crimes against Afghan people and state.

    Coming to the Northern Ireland process, ever since this successful peace process it is pretty common in the world of counter terrorism to try applying the lessons learnt during this textbook case of negotiating with the terrorists. In 2012, Jeffrey Donaldson and Denis Haughey, two prominent Irish politicians flew to Afghanistan to offer advice to Hamid Karzai’s government to help kick-start a formal process of peace talks with the Taliban. Donaldson was in the Ulster Unionists’ negotiating team in 1998 for the famous Good Friday Agreement, while Haughey led the Social Democratic and Labour Party (SDLP) team in the Brooke-Mayhew Talks and later the talks which led to the Good Friday Agreement. Although the Irish and the Afghan insurgencies has altogether different ideological shades, with the former demanding the right to self determination and the latter committing acts of terrorism on Afghan people in order to impose their rule and their own version of religion. Yet there were some applicable lessons from the Irish experience that Afghanistan could employ in dealing with its own domestic militants.

    The Northern Ireland peace process, however, is starkly different from what happened in NA 120 recently or has been happening generally in Pakistan despite military operation Zarb-e-Azb and the National Action Plan (NAP). The peace process followed in Northern Ireland was stretched over various years and culminated in the complete disarmament of the insurgency and its leader’s mainstreaming into the political process. The process was completely transparent wherein various agreements were achieved and announced, but not before briefing the parliament thereon. One could cite speeches by John Major and later by Tony Blair to the parliament briefing on the process.

    In case of JuD, all of it might not be applicable or even comparable. Sinn Fein was political face of Irish Republican Army, an underground organisation with domestic agenda that disarmed and surrendered weapons to be accepted as legitimate actor in political process. The groups like JuD, LeT and JeM are already quasi-state supported and there is no sign they have been disarmed. Secondly, these groups have been carrying out violent activities outside Pakistan. This will certainly affect our image internationally.

    Since they are not protagonists in a civil war, their international targets and victims have to accept their demobilisation. Otherwise, Pakistan’s international isolation would exacerbate.

    More importantly, these groups will inject xenophobia and extremist views in the body politic if given free hand in politics. They’ll propagate their xenophobic ideology to masses who are already ripe to fall for the trap. If it happens, the state would gradually lose its agency to change the policy if it wants to change it in future. The recent example being the anti conversion law that Sindh’s provincial assembly passed. After strong opposition led by JuD and other groups, the provincial government decided to let go of a law made by the elected representatives.

    The optics of such an opaque ‘mainstreaming’ of these terrorist organisations won’t go down well with the world. Whosoever is propagating the image of us as a terror-supporting nation, would be dancing to see all this because this gives them enough meat to continue with their hoopla.

    The question, then arises, how else to deal with these Frankenstein monsters? The answer is simple; the state should immediately stop all kinds of ideological or logistic support to these groups. If there is a process of negotiations, parliament must be requested for input and buy-in. Once the disarmament is achieved, it must be properly announced with evidence of arms decommissioning, so that the entire world knows what these groups are committing themselves to. A carefully devised de-radicalisation framework should be developed for these groups before allowing them any political activity. For a specific period, all activity by these groups must be watched by a specially designated Commission to ensure they don’t eulogise their militant achievements and glorify their violent methods and objectives. We have to have guarantees in place to ensure that while mainstreaming the violent extremists, we are not mainstreaming extremism.


    The writer is a staff member who tweets at @marvisirmed and can be contacted at marvisirmed@gmail.com

  3. #138
    Turbanator Senior Contributor Double Edge's Avatar
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    If only...

    A pragmatic foreign policy | Dawn (op-ed) | Sept 30 2017

    The above scenario sketches the possibilities of turning our strategic location from being a source of grief and infamy to becoming a major driver of Pakistan’s economic uplift. But this cannot happen without a broad consensus such as that on CPEC, ie between all political parties and between the civilians and the military. Economic security should henceforth become the main pillar for national security and foreign policy.
    Sounds so elementary , that is to a former world bank director

  4. #139
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    On OBOR, US backs India, says it crosses 'disputed' territory

    "In a globalised world, there are many belts and many roads, and no one nation should put itself into a position of dictating 'one belt, one road'," Mattis told members of the Senate Armed Services Committee during a Congressional hearing.

    "That said, the One Belt One Road also goes through disputed territory, and I think, that in itself shows the vulnerability of trying to establish that sort of a dictate," Mattis said apparently referring to India's position on CPEC.

  5. #140
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    Venezuela’s Road to Disaster Is Littered With Chinese Cash

    Politicized loans left the socialist South American country trapped under a mountain of Chinese debt — but now others want to sign up for Beijing's "generosity."

    The Venezuelan and Chinese economies seem like they could hardly have less in common. The Venezuelan government of Nicolás Maduro has looted the state-run oil company Petróleos de Venezuela (PDVSA) to pay for the “Bolivarian revolution,” the socialist movement begun under the late leader Hugo Chávez. With oil prices down, the country is unable even to repair rigs or pay workers to generate income, and the government now faces the prospect of a mass uprising. Meanwhile, half a globe away, China’s gleaming malls stand in stark contrast to Venezuela’s empty shelves.

    But Venezuela’s ruinous state has more to do with China than one might think — specifically, with Chinese President Xi Jinping’s plan for expanding China’s global influence through financial diplomacy. Venezuela’s collapse is about to serve as an object lesson on that plan’s high costs for China’s erstwhile partners — and ultimately for China itself.

    Within a few years of Chávez assuming power in 1999, China, seeing in the new leader an ideological ally, began increasing lending to Venezuela. By 2006, the Chávez regime’s debt levels had become worrying enough that then-World Bank President Paul Wolfowitz, referring to Venezuela, noted that “there is a real risk of seeing countries which have benefited from debt relief become heavily indebted once more.”

    Officially, lending from Beijing comes without strings or concerns about nonfinancial matters. The reality is more nuanced. No one doubts Beijing cares little for niceties such as human rights, environmental protection, and anti-corruption when working abroad. Until recently, even geopolitical flag planting was relatively unimportant to Chinese technocrats.

    But there was still a hard-edged focus on Chinese interests. The driving motivation of Chinese investment and lending since 2000 has been an obsession with opening up new export markets and securing access to natural resources. China’s interests in gaining friends in the Western Hemisphere while securing access to oil overlapped with Venezuela’s interest in diversifying its customer base away from the United States. But that overlap of interests doesn’t mean China has ever offered any sort of discount on its loans. China lent at exorbitant rates to Venezuela. Now, China refuses to renegotiate those debts, even as the South American country’s economy and oil industry crater.

    From 2007 to 2014, China lent Venezuela $63 billion — 53 percent of all its lending to Latin America during this time. There was an important catch to this largesse; to guarantee repayment, Beijing insisted on being repaid in oil. With most lending agreed to when oil hovered at more than $100 a barrel, as it did for most of 2007-2014, it seemed a good deal for both sides. However, when oil dropped to close to $30 a barrel in January 2016, this caused Venezuela’s price tag for serving its debt to explode. To repay Beijing today, Venezuela must now ship two barrels of oil for every one it originally agreed to.

    If Venezuela collapses and Maduro departs unceremoniously, China faces a large risk of diplomatic and financial blowback. Opposition politicians are well aware that China propped up the ruinous Maduro rule. A new Venezuelan government could well refuse to honor the Maduro-era obligations entirely and look to Washington for support instead. That would be both economically and politically embarrassing for China, which in the past has been a vigorous supporter of the right to default — as long as the debts were owed to the West.

    But a Venezuelan default could have consequences far beyond Caracas and Beijing. As part of its Belt and Road Initiative (BRI), China is planning to extend the same kind of deal it made with Venezuela to many more countries around the world. By leveraging its financial strength and expertise in infrastructure, China saw an opportunity to push its influence farther afield, winning friends and securing assets at the same time.

    America’s abdication of its historical leadership role under Donald Trump has made it easier for China to push this grand geostrategic vision, especially after the Barack Obama’s administration’s failure to follow up the much-hyped “pivot to Asia” with real substance. Many Asian countries talk quietly, and some openly, about craving greater U.S. engagement in the region rather than quiet surrender to Beijing’s dominance. But if the choice is a risky deal with Beijing or no deal at all with the West, many have shown that they will choose the former.

    Venezuela collapsed thanks to a malevolent dictatorship pushing disastrous economic policies aided by a benefactor willing to extend near bottomless credit. This same toxic mix is present throughout many of the countries receiving large amounts of Chinese lending under the BRI. Worried about stagnating economies, autocrats around the world see an opportunity to drive growth by borrowing from China to fund white elephant projects regardless of the long-term consequences.


    While China may argue that it makes investment decisions on a purely commercial basis, its history with Venezuela argues otherwise. That has been confirmed by the problems that have already cropped up in BRI-related projects. In the short time since 2016, we’ve already seen major debt problems from Chinese infrastructure projects in Sri Lanka and Pakistan. China negotiated a swap of its debt for a 99-year leasehold in a Sri Lankan port project along with surrounding business park development interests. China provided emergency funding to Pakistan over the past year to stave off a potential currency crisis but still plans to invest $52 billion over the next few years in infrastructure projects.

    Beijing likes to cite the Marshall Plan when talking about the BRI, but its deals are far more shrewd and self-serving. The BRI scheme isn’t offering concessionary lending or international aid but market-based lending rates with high-interest loans. The borrower countries then have to use Chinese firms, inputs, and workers to build out their railways and ports. China is making the loans not out of a long-sighted vision of a better global order, as its boosters like to claim, but from a calculation of the financial incentives it needs to keep its own over-indebted firms afloat and their workers working.


    That’s going to come with hard costs for China. Reports indicate that Chinese officials expect to incur significant losses from their loans to South and Central Asian countries that can’t necessarily pay them back. Consider Sri Lanka, which effectively defaulted on a $2 billion loan from China but subsequently received an offer for an additional $32 billion from Beijing to fund infrastructure projects. There are also good reasons to think Pakistan won’t be able to absorb China’s large investment inflows without triggering inflation, thus undermining its ability to repay the loans.

    Officially, China plans to invest $5 trillion over the next 10-15 years in the BRI. If this amount actually materializes in practice, it represents a major sum, even for China, whether in absolute terms or relative to GDP. That means that even relatively small defaults could have a serious cost, economically and politically.

    There’s no surer way for China to lose goodwill worldwide than to provide large amounts of ruinous lending that pushes developing countries to financial ruin. Sri Lanka has seen widespread protests and riots over Chinese debt. Meanwhile, Beijing has been leaning on the Venezuelan opposition not to default on the existing debts. All this is already having reputational costs for China. Having witnessed the consequences of Beijing’s lending in Venezuela, Sri Lanka, and Pakistan, other potential borrowers seem to have cooled on the possibility of borrowing from Beijing — or at least to be more discerning of the risks.

    Large-scale lending projects without a focus on their economic viability and the repayment capacity of the borrowers are hardly the soundest basis for financial diplomacy of the sort China is attempting to practice. At best, it will lead to mutual suspicions and tensions between lender and borrower. At worst, it will prove financially ruinous for countries burdened with debts they cannot repay in foreign currency they do not possess. Unless China’s lending gets smarter, it may find that nobody’s interested in the money it has to offer.
    That would be both economically and politically embarrassing for China, which in the past has been a vigorous supporter of the right to default — as long as the debts were owed to the West???? - Can anyone please expand this bit.

  6. #141
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    Quote Originally Posted by DOR View Post
    Exactly what part of "China dumps the debt on the market for purely political reasons" implies some inability to repay on the part of Sri Lanka?

    Bear in mind I am not focused on Sri Lanka; this is about the utility of using debt as a political tool.
    I would have to say I did not get your point. If you can explain a bit more, please.

  7. #142
    Senior Contributor DOR's Avatar
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    Quote Originally Posted by Oracle View Post
    I would have to say I did not get your point. If you can explain a bit more, please.
    If I understood the supposition correctly, the scenario was this:
    a) China holds about 15% of Sri Lanka's foreign debt ($10/$65 bn)
    b) China gets mad at Sri Lanka for some reason.
    c) China decides to express its displeasure by dumping the debt on the market
    d) SL's debt price collapses, ... which makes it very cheap to buy back nd does nothing to SL's ability to issue new debt.
    Trust me?
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  8. #143
    Turbanator Senior Contributor Double Edge's Avatar
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    Quote Originally Posted by DOR View Post
    d) SL's debt price collapses, ... which makes it very cheap to buy back nd does nothing to SL's ability to issue new debt.
    Don't get this part ?

    that debt is owed to China, putting it on the market and its price collapses means SL now owes less to China ? can't be

    So what purpose is served by China dumping SL debt in the market again

  9. #144
    Senior Contributor DOR's Avatar
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    A debt instrument is a negotiable security, with more or less liquidity depending on who issued it. There is an open market in such assets, and that is where China would go to sell its holdings of SL debt.

    Flood the market -- SL debt isn't very liquid -- and the price drops like a stone trying to do a backstroke.

    SL now owes less to China, because China sold the debt to ... JPMorgan, or HSBC.

    And so, absolutely no purpose is served by China trying to use debt as a policy lever.
    Which was my original point: debt ain't a weapon.
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  10. #145
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    Quote Originally Posted by Double Edge View Post
    Defaulting means the cost of borrowing in the future goes up across the board. Sovereign debt ratings get a low score. This in itself is a strong disincentive not to default let alone refuse because future becomes very uncertain.

    What happened in Greece was the ECB prxy for Germany was insisting on austerity measures which the Greeks refused. There was talk of Grexit, then a far left govt entered office and renegotiated the terms.
    What I read, IIRC, during the peak of the financial crisis is that the Greeks cooked their books to get into the EU. Can discuss it later.

    However, not all countries actualy care about debt and default. What I was saying is that just one of the semi-stable countries need to default and others (not all) will follow suit. Look at Venezuala, if a deal can be made with the opposition, that if they are propelled to power, they would cancel all contracts with the Chinese and default. Powerful contries then come in with aid, Venezuala does some structural changes to their economic policies, and US lead them into WB and the IMF. It can be done.

    Quote Originally Posted by Double Edge View Post
    Am just surprised it happened in less than a decade. That's what white elephants are. This was bad planning on the Sri lankan part. But the present administration gets to blame it on the previous guy.
    After the war, the previous administration wanted money for re-building. India, for reasons unknown, didn't show much interest (national security disaster), and the Chinese are always willing to give. It's like the local loan sharks.

    Quote Originally Posted by Double Edge View Post
    No need for 51%, little over 20% of GDP is enough to be at high risk of political & economic state capture. See executive summary, page xi about bulgaria in this report
    Felt like I was reading the little Chinese red book of how it invests money in semi-stable, unstable and poor countries and milks it dry.

    Quote Originally Posted by Double Edge View Post
    Which acts as a disincentive right. Nobody wants crashes.
    I lived through the last financial crisis and I surely don't want another one. But 1% of the worlds 1% control most things. If they think a crash, which would cause an economic meltdown is in their national security interets, they would go ahead and do it. The poor, even in good times are left scavenging for food.


    Quote Originally Posted by Double Edge View Post
    The only positive i hear is from the Pak govt but i sense its more to counter the negative media coverage within Pakistan. It isn't entirely disingenious
    Why is there negative media coverage in Pak in the first place when the media is controlled by the Pak Army/ISI?


    Quote Originally Posted by Double Edge View Post
    There are steak houses in the city. They use wet aged. About 30 days and its not hard or chewy. Dry aged requires some investment that's all. The demand is there. You won't get corn fed but the stuff we get here when done right isn't bad. Dry aged is a new thing in any case.
    Not a fan of wet-aged. Either fresh or dry aged. Having said that, dry aging is 1000s of years old. Spanish for pork, Norwegians for salmon etc. Even the tribals in the NE have been doing that for centuries. In earlier days, it was the only method to store food for winter or for a crisis.

    The thing that has changed now is dry aging with cold air in a temperature controlled room, ealier it was dry aging over fire, like how even now sausages are smoked. Anyway, I hope right-wingers don't check this discussion or bhakts will flood this forum.

    Btw, it's buffalo meat right, when you talk about steakhouses in Bangalore?


    Quote Originally Posted by Double Edge View Post
    17% is for early harvest projects which the Pak development minister in a talk made clear. These are commercial to get the ball rolling. I would be surprised if there is a default here as it wont be good for future development. Not all will be commercial as the payment terms are not interesting for commercial banks who want faster payback. Not that this distinction matters to journalists they still write as if every project is commercial and at 17%. No wonder the pak fin min has a rebuttals section. Don't be cynical and ignore it. Take it into account and figure out the mean. Scary, attention seeking rhetoric sells. Why are only the journalists right. example. Also look at the Banglas. What terms are they getting from the CNB. Will be similar. We should be talking about Bangla deals here too to get some perspective.
    Early days, another 5 years and we will know the details of CPEC. I don't agree with the first-post article you posted, not because of the reasons mentioned there, but because I believe basic railway infrastructure is needed first.
    Last edited by Oracle; 05 Oct 17, at 03:38.

  11. #146
    Senior Contributor DOR's Avatar
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    Quote Originally Posted by Oracle View Post
    What I read, IIRC, during the peak of the financial crisis is that the Greeks cooked their books to get into the EU. Can discuss it later.

    However, not all countries actualy care about debt and default.
    Greece joined the EU in 1981.

    Any country that doesn't care about debt and default is (a) free of either, e.g., oily; or (b) The USA.
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  12. #147
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    Quote Originally Posted by DOR View Post
    Greece joined the EU in 1981.

    Any country that doesn't care about debt and default is (a) free of either, e.g., oily; or (b) The USA.
    When you read and quote, read and quote the paragraph in its entirety. For e.g.
    Powerful contries then come in with aid
    Which country do you think I had in my mind?

  13. #148
    Turbanator Senior Contributor Double Edge's Avatar
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    Quote Originally Posted by Oracle View Post
    After the war, the previous administration wanted money for re-building. India, for reasons unknown, didn't show much interest (national security disaster), and the Chinese are always willing to give. It's like the local loan sharks.
    Because what Rajapaksha wanted was economically unviable. We'd give them a grant and they'd have trouble paying it back which would then work negatively for us with their domestic politics. We'd be scoring a self goal.

    Countries lending to countries isn't like loan sharks. It isn't like unable to repay a mortgage and then having your house repossessed.

    DOR said

    - its rare for a sovereign country to default. Presumably because a sovereign govt can always print their own currency. The people will be left paying the bill for however long it takes. Less govt benefits for them, more austerity and higher inflation as their currency weakens. So China isn't going to lose, they will restructure and rollover debt if necessary. As the sina article showed, it was the private chinese investors that stand to lose their shirts

    - Debt isn't a weapon. The Chinese can't force sovereign countries to repay. If a country stiffs the Chinese the market figures this country is high risk and in the future lending rates get higher.

    Maybe that's the primary reason we get lower rates than the Paks do, because we're a better risk. The Chinese aren't lending at high rates, they are lending at rates that account for the risk that comes with the loan. Additionaly, given they're the only one prepared to makes loans as large they get to set the price. They aren't forcing anyone to take their money


    Why is there negative media coverage in Pak in the first place when the media is controlled by the Pak Army/ISI?
    Opposition party view point so have to strip that layer away. Given the low quality of the reporting, it just lowers the signal to noise ratio


    I don't agree with the first-post article you posted, not because of the reasons mentioned there, but because I believe basic railway infrastructure is needed first.
    Aha, now you see the opposition viewpoint, in an Indian context : )
    Last edited by Double Edge; 05 Oct 17, at 15:14.

  14. #149
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    =Double Edge;1030732]DOR said

    - its rare for a sovereign country to default. Presumably because a sovereign govt can always print their own currency. The people will be left paying the bill for however long it takes. Less govt benefits for them, more austerity and higher inflation as their currency weakens. So China isn't going to lose, they will restructure and rollover debt if necessary. As the sina article showed, it was the private chinese investors that stand to lose their shirts
    The US, Japan, the UK and to a much lesser extent the EuroZone can issue local currency debt, and if repayment becomes a problem, print more money. Not so in the less-developed world. Their economies are too weak to absorb significant amounts of debt, and foreign investors demand a premium to take an exchange rate risk.

    Once a country devalues away its domestic currency debt (usually via inflation, a la Zimbabwe), the market is spooked. Once a country defaults on its foreign-currency debt, the market is spooked. Spooked markets find something else to do, which makes it extremely difficult/expensive for defaulters and devaluers to re-enter the debt market.
    Trust me?
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    Turbanator Senior Contributor Double Edge's Avatar
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    Quote Originally Posted by DOR View Post
    The US, Japan, the UK and to a much lesser extent the EuroZone can issue local currency debt, and if repayment becomes a problem, print more money. Not so in the less-developed world. Their economies are too weak to absorb significant amounts of debt, and foreign investors demand a premium to take an exchange rate risk.
    Took Iceland five years to bounce back. They have their own currency. The smaller eurozone countries adopted the euro and and circulate a currency whose value they cannot change to suit their needs

    Once a country devalues away its domestic currency debt (usually via inflation, a la Zimbabwe), the market is spooked. Once a country defaults on its foreign-currency debt, the market is spooked. Spooked markets find something else to do, which makes it extremely difficult/expensive for defaulters and devaluers to re-enter the debt market.
    So when you said its rare to default, how does that apply here. There are limits and i think the CNDB would be aware to what point they can continue to lend or not so that a country doesn't default. I don't think autocrats will be as diciplined with taking loans
    Last edited by Double Edge; 06 Oct 17, at 11:55.

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