By: Charles Goodhart and Dimitrios Tsomocos The sovereign debt crisis in Southern Europe is a reminder that increasing indebtedness can become unsustainable, whether that indebtedness accrues to the government or to the private sector. But when this busts, the danger and fragility of the capital flow from the surplus country also becomes exposed. The focus of discussion in the eurozone has been on the need to limit the build-up of indebtedness in the deficit countries. A problem is that the focus just on the indebted countries imparts a deflationary bias for the eurozone as a whole, because the expenditures in the deficit countries then have to be reduced while this is often not matched by any equivalent increase in expenditures in the ...



















