The difference between a sovereign debt and the debt of a country within the Euro-zone (in line with a good sovereign debt analysis that I quoted previously):
"French officials apparently don’t recognize the importance of the fact that Britain is outside the eurozone, and therefore has its own currency, which means that there is no risk that Britain will default on its debt. When interest and principal on British government debt come due, the British government can always create additional pounds to meet those obligations. By contrast, the French government and the French central bank cannot create euros.
If investors are unwilling to finance the French budget deficit – that is, if France cannot borrow to finance that deficit – France will be forced to default. That is why the market treats French bonds as riskier and demands a higher interest rate, even though France’s budget deficit is 5.8% of its GDP, whereas Britain’s budget deficit is 8.8% of GDP."
The same article also contains an interesting piece of history:
"It was French officials Jean Monnet and Robert Schuman who launched the initiative for European political union just after World War II with the call for a United States of Europe. The French regarded the creation of the euro as an important symbol of progress toward that goal. In the 1960’s, Jacques Delors, then the French finance minister, pressed for a single currency with a report, “One Market, One Money,” which implied that the European free-trade agreement would work only if its members used a single currency."
I swear that I did not know about this fact when I named one of my posts United States of Europe, though I admit that the idea is obvious.
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