2 SEP 2010

Matej Hruska | EUobserver

Default in today's advanced economies is unnecessary and unlikely and the risk of debt restructuring is currently significantly overestimated, economists from the International Monetary Fund wrote in a report published Wednesday (1 September).

The IMF tried to downplay the likelihood of a default by some EU member states, while also warning that the debt burden in many wealthy countries may be close to its limits.

"Although the fiscal fundamentals look challenging, current market indicators of default risk seem to reflect some market overreaction," the IMF economists wrote.

According to their assessment, due to the long maturity of public debt in advanced countries at the beginning of the crisis, their debt service is still relatively contained. The means the problem is not the debt burden, but the primary deficit. In eight cases since 1980 when an advanced economy with government debt of at least 60 percent reduced its deficit to zero, none defaulted.

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