The Dual Debt Problem in the US and in Europe: Are Policy Makers Addressing the Right Issues?

Title of this chapter indicates that the US and the heavily indebted countries in the Euro zone have a dual debt problem: a balance of payment deficit, engendering the need to borrow from other countries, and a sovereign debt problem, engendering a need to borrow from anywhere. The chapter discusses the nature and the order of magnitude as well as the possible solutions of the dual debt problem of the United States and the case of Greece and Italy to illustrate the situation in Europe and the Euro zone. The thrust of the argument is that there is need for both fiscal correction and for sustained growth, and for improving the competitive position of the indebted deficit countries on both sides of the Atlantic.