sexta-feira, outubro 04, 2013

Workers in the front line of a sovereign debt crisis

A default is a default is a default ...
If a Government is hopelessy overleaveraged and over-indebted, who will it default on 
- its workers, or 
- its pensioners, or 
- its supliers, or
- its future taxpayers, ... but NOT
- its current creditors and bondholders 
Is this what is now called the "moral hazard trade" or rather a case of crashing of the weakest link ?

The effort to cut spending seems to be falling first  and foremost on US Federal civil servants, the workers, whose. 
This suggests that breaking that  "labor contract" is seen as the path of least resistance or least cost for a debt-pressed  Government.  

The same was seen nearly everywhere in the Eurozone debt crisis, with the cuts to wages and pensions as the primary deleveraging mechanism. 

In contrast, in a corporate default, workers are given top priority in repayment. 

Reforma do IRC e Portugal perde dois lugares no 'ranking' da competitividade
A análise de António Gaspar, Mariana Abrantes de Sousa, Mário Caldeira Dias e Rogério Fernandes Ferreira, num programa conduzido por Catarina Tavares Machado. "Conselho Consultivo" de 6 de Setembro de 2013.