Sir, – The crux of the kerfuffle over the euro is that financial markets are of the opinion that sovereign borrowers might default on their not-inconsiderable loan obligations, and accordingly demand that a significant “risk premium” be added to the “risk free” interest rate whenever a government issues a new bond.
Governments dispute the markets’ view on the likelihood that they might default, and (most) countries are introducing policies to reduce any such occurrence. The markets are, however, both having their cake and eating it, charging penal interest rates while governments redirect national wealth to service their financial obligations.
Wouldn’t it be more equitable if, when a bond matures after, say, 10 years, and there has been no default during its lifetime, the bond holder is then required to reimburse the government for the (uneccessary) risk premiums it has been paying? Wouldn’t this be much fairer than the various schemes of burning bondholders that are being bandied around? – Yours, etc,