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  • Economic Letter: 'Private Credit and Public Debt in Financial Crises'

    In a new San Francisco Fed Economic Letter , economists Òscar Jordà , Moritz Schularick , and Alan M. Taylor try to settle the debate over whether private credit or public debt was the bigger culprit in the global economic crisis. They award points to each. In short, their research seems to show that private credit booms put economies in difficult positions. And public debt makes it difficult for economies to recover. The narrative of the recent the global financial crisis in advanced economies falls into two camps. One camp emphasizes private-sector overconfidence, overleveraging, and overborrowing; the other highlights public-sector profligacy, especially with regard to countries in the periphery of the euro zone. One camp talks of rescue and reform of the financial sector. The other calls for government austerity, noting that public debt has reached levels last seen following the two world wars. Figure 1 Credit and debt since 1870: 17-country average Credit and debt since 1870: 17-country average Source: Jordà, Schularick, and Taylor (2013). Figure 1 displays the average ratio of bank lending and public debt to GDP for 17 industrialized economies (Australia, Belgium, Canada, Denmark, Finland, France, Germany, Italy, Japan, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom, and the United States). Although public debt ratios had grown from the 1970s to the mid-1990s, they had declined toward their peacetime average before the 2008 financial crisis. By contrast, private credit maintained a fairly stable relationship with GDP until the 1970s and then surged to unprecedented levels right up to the outbreak of the crisis. Spain provides an example of the woes in the euro zone periphery and the interplay of private credit and public debt. In 2007, Spain had a budget surplus of about 2% of GDP and government debt stood at 40% of GDP (OECD Country Statistical Profile). That was well below the level of debt in Germany, France, and the United States. But by 2012, Spain’s government debt had more than doubled, reaching nearly 90% of GDP, as the public sector assumed large losses from the banking sector and tax revenues collapsed. Thus, what began as a banking crisis driven by the collapse of a real estate bubble quickly turned into a sovereign debt crisis. In June 2012, Spanish 10-year bond rates reached 7% and, even at that rate, Spain had a hard time accessing bond markets. Once sovereign debt comes under attack in financial markets, banks themselves become vulnerable since many of them hold public debt as assets on their balance sheets. The new bout of weakness in the banking system feeds back again into the government’s future liabilities, setting in motion what some have called the “deadly embrace” or “doom loop.” The conundrum facing policymakers is this: Implement too much austerity and you risk choking off the nascent recovery, possibly delaying desired fiscal rebalancing. But, if austerity is delayed, bond markets may impose an even harsher correction by demanding higher interest rates on government debt. Matters are further complicated for countries in a monetary union, such as Spain. Such countries do not directly control monetary policy and therefore cannot offset fiscal policy adjustments through monetary stimulus by lowering domestic interest rates. In addition, central banks in these countries have limited capacity to stave off self-fulfilling panics since their lender-of-last-resort function evaporates. Fluctuations in fiscal balances over the business cycle are natural. As economic activity temporarily stalls, revenues decline and expenditures increase. With the recovery, fiscal balances typically improve. But the debate on what is a country’s appropriate level of public debt in the medium run continues to rage. It is unclear whether high debt is a cause or a consequence of low economic growth. That said, public debt is not a good predictor of financial crises. Read the full letter here .
  • Dutch Downgrade Has Germany Watching Debt Ratings Closely

    Late last month, Standard & Poor's downgraded the Netherlands' credit rating . The news may not have received a lot of attention in the U.S., but it was certainly startling in Europe, especially in neighboring Germany. If the Netherlands, a country that seemed to be doing all the right things post-crisis, and sporting a relatively low debt to GDP ratio, could be downgraded, what does that mean for others? Tilburg University economists Sylvester Eijffinger and Edin Mujagic say that Germany is right to be concerned, and that the rest of the EU needs to be watching the German response closely. From Project Syndicate : The economies of Germany and the Netherlands are closely linked, with the latter highly dependent on its larger neighbor. For decades, Dutch monetary policy was based on matching German interest rates and maintaining a stable exchange rate between the Dutch guilder and the Deutsche Mark. Likewise, both countries emphasize low deficits and public debt, with the Netherlands having long been Germany’s most loyal ally in European fiscal, economic, and monetary matters. Indeed, Germany and the Netherlands were among the main proponents of the European Union’s Stability and Growth Pact. Germany’s public debt is higher than the Netherlands’, especially considering that the Dutch have a natural-gas supply worth well over 20% of GDP and pension-fund savings of some €1 trillion ($1.37 trillion), or roughly 140% of GDP. And, while Germany’s fiscal position is currently much healthier than that of the Netherlands, owing to its exceptional economic performance since the crisis began, faltering output is now threatening to weaken it considerably. S&P cites weakening growth prospects as the reason for its downgrade of the Netherlands. The Dutch economy contracted by 1.2% this year, and is expected to grow by a meager 0.5% next year. But the outlook is not much better for Germany. While the Bundesbank projects a 1.8% annual growth rate for next year, this figure is highly uncertain. And, in the medium term, Germany will face significantly greater challenges from population aging than the Netherlands. Another potentially destabilizing factor is the cost of saving the euro, which could skyrocket if the crisis escalates further. Given that Germany and the Netherlands have provided large guarantees, they risk a substantial increase in public debt. Read Germany's Coming Downgrade here .
  • IMF: 'More Fiscal Integration to Boost Euro Area Resilience'

    In a new paper out this week, IMF researchers call for "deeper fiscal integration" among euro area countries. In reading the paper, it appears IMF researchers view the euro experiment as incomplete. Despite struggles during the global economic crisis and global recession, there is confidence in the euro area, but no so much in its current "architecture." From the paper: Large country-specific shocks. While it was recognized that countries joining the euro area had significant structural differences, the launch of the common currency was expected to create the conditions for further real convergence among member countries. The benefits of the single market were to be reinforced by growing trade, and financial, links—making economies more similar and subject to more common shocks over time (Frankel and Rose, 1998). In that context, these common shocks would be best addressed through a common monetary policy. Instead, country-specific shocks have remained frequent and substantial (Pisani-Ferry, 2012; and Figure 1). Some countries experienced a specific shock through a dramatic decline in their borrowing costs at the launch of the euro, which created the conditions for localized credit booms and busts. The impact of globalization was also felt differently across the euro area, reflecting diverse trade specialization patterns and competitiveness levels (Carvalho, forthcoming). These country-specific shocks have had lasting effects on activity. And divergences in growth rates across countries have remained as sizeable after the creation of the euro as before (Figure 2). Deeper into the paper we start to see some proposed solutions: Long-term options for the euro area. Cooperative approaches to foster fiscal discipline have shown their limits in the first decade of EMU. On that basis, and in light of international experience, two options emerge to foster fiscal discipline in the euro area in the longer term. One could be to aim to restore the credibility of the no bailout clause, including through clear rules for the involvement of private creditors when support facilities are activated. But the transition to such a regime would have to be carefully managed and implemented in a gradual and coordinated fashion, so as to not trigger sharp readjustments in investors’ portfolios and abrupt moves in bond prices. Another option would be to rely extensively on a center-based approach and less on market price signals. This would, however, have to come at the expense of a permanent loss of fiscal sovereignty for euro area members. In practice, the steady state regime might have to embed elements of both options, with market discipline complementing stronger governance. Read a summary of the paper, and download the full paper, here .
  • IMF Calls for 'Concerted Action' Among Eurozone Leaders

    The IMF released its latest assessment of the Euro Area economy this week. While IMF Managing Director Christine Lagarde commended EU leaders for taking strong action to stem the financial crisis, there is clearly a lot of work to be done before the Eurozone restarts growth. Here is an abbreviated version of the IMF assessment, taken from the headlines within the report: 1. Important actions at both the national and euro-wide levels have tackled the immediate threats to the single currency evident at this time last year. 2. Nevertheless, the centrifugal forces across the euro area remain serious and are pulling down growth everywhere. 3. In this setting, reviving growth and employment is imperative. 4. Stronger bank balance sheets are essential for economic recovery. 5. A credible assessment of bank balance sheets is necessary to lift confidence in the euro area financial system. 6. Full banking union is necessary to reduce financial fragmentation. 7. This calls for expediting the reforms in train. 8. A strong single resolution mechanism is critical to ensure timely and least-cost resolution of banks. 9. More support from the ECB could also help reduce fragmentation. 10. Given weak growth and subdued inflation, more monetary easing will likely be necessary to support demand. 12. The unfinished agenda here is large—but also promising. 13. The challenge to boost growth and create jobs calls for concerted policy action at the pan-European and national levels. IMF analysts proposed four key tasks for EU policymakers. You can read and them, and read beyond the headlines listed above, here .
  • Ireland as Ongoing Case Study for Austerity Programs

    At Project Syndicate , Mohamed El-Erian reminds us that Ireland is again an interesting case study in economic policy. When the Celtic Tiger was de-clawed (well, worse, actually) during the global economic crisis, most Irish civilians suffered, while the banks were propped up by a series of emergency measures. So it would have been rational to expect to see massive public opposition to harsh austerity measures. And yet, the reaction in Ireland has been far tamer than in fellow PIIGS countries. El-Erian notes that it is too early to tell what the long term effects of austerity will be, though it is important to keep watching: Austerity’s supporters point to the fact that Ireland is on the verge of “graduating” from the troika’s program. Growth has resumed, financial-risk premia have fallen sharply, foreign investment is picking up, and exports are booming. All of this, they argue, provides the basis for sustainable growth and declining unemployment. Ireland, they conclude, was right to stay in the eurozone, especially because small, open economies that are unanchored can be easily buffeted by a fluid global economy. “Not so fast,” says the other side. The critics of austerity point to the fact that Irish GDP has still not returned to its 2007 level. Unemployment remains far too high, with alarming levels of long-term and youth joblessness. Public debt remains too high as well, and, making matters worse, much more of it is now owed to official rather than private creditors (which would complicate debt restructuring should it become necessary). The critics reject the argument that small, open economies are necessarily better off in a monetary union, pointing to how well Switzerland is coping. And they lament that eurozone membership means that Ireland’s “internal devaluations,” which involve significant cuts in real wages, have not yet run their course. The data on the “Irish experiment” – including the lack of solid counterfactuals – are not conclusive enough for one side to declare a decisive victory. Yet there is some good analytical news. Ireland provides insights that are helpful in understanding how sociopolitical systems, including economically devastated countries like Cyprus and Greece, have coped so far with shocks that were essentially unthinkable just a few years ago. Read Ireland and the Austerity Debate here .
  • Summers: Takeaways from the Reinhart-Rogoff Error

    In the Washington Post , Lawrence Summers weighs in on the now infamous Rogoff-Reinhart coding error . Summers seems a bit annoyed at both those people who don't see the error as a big deal, and those who are "taking joy" in Rogoff and Reinhart's mistake. Summers: Where should these debates settle? As someone who has done a fair amount of econometric research, consumed such research as a policymaker and participated (as an advocate) in debates about fiscal stimulus and austerity, these would be my takeaways: First, this experience should accelerate the evolution of mores with respect to economic research. Rogoff and Reinhart are rightly regarded as careful, honest scholars. Anyone close to the process of economic research will recognize that data errors like the ones they made are distressingly common. Indeed, the JP Morgan risk models in use when the London “whale” trade was placed appear to have had errors similar to those made by Reinhart and Rogoff. Going forward, authors, journals and commentators need to devote more effort to replicating significant results before broadcasting them widely. More generally, no important policy conclusion should ever be based on a single statistical result. Policy judgments should be based on evidence accumulated from multiple studies done with differing methodological approaches. Even then, there should be a reluctance to accept conclusions from “models” without an intuitive understanding of what drives them. It is understandable that scholars want their findings to inform policy debates. But they have an obligation to discourage and on occasion contradict those who would oversimplify and exaggerate their conclusions. Second, all participants in policy debates should retain a healthy skepticism about retrospective statistical analysis. Trillions of dollars have been lost and millions of people have become unemployed because the lesson learned from 60 years of experience between 1945 and 2005 was that “American house prices in aggregate always go up.” This was no data problem or misanalysis. It was a data regularity until it wasn’t. The extrapolation from past experience to future outlook is always deeply problematic and needs to be done with great care. In retrospect, it was folly to believe that with data on about 30 countries it was possible to estimate a threshold beyond which debt became dangerous. Even if such a threshold existed, why should it be the same in countries with different currencies, financial systems, cultures, degrees of openness and growth experiences? And there is the chestnut that correlation does not establish causation and so any tendency for high debt and low growth to go together might well reflect the debt accumulation that follows from slow growth. Read Lessons can be learned from Reinhart-Rogoff error here .
  • Simon Nixon on 'What Comes After Austerity?'

    With Italy's new compromise government making moves to end austerity measures, the austerity backlash in Europe seems to be gathering momentum. Wall Street Journal Europe Editor Simon Nixon takes a look at what might be ahead for the euro zone. But he wants us to note that some European countries are now able to consider dropping austerity measures because, he argues, accepting them before has helped to lower borrowing costs. From the WSJ News Hub :
  • Federico Fubini Sees Ominous Signs in Europe's Imbalanced Markets

    As Italy's newly named president leads a public shift away from hardline austerity policies , noted Italian financial columnist Federico Fubini raises a provocative question: "Is Europe in depression?" At Project Syndicate , Fubini cites economic historian Charles Kindleberger in pointing to a "failure to 'maintain a market for distressed goods'" as a major reason the Great Depression was so severe. Fubini: Surely history is not repeating itself – at least not in the literal sense. European creditor countries today are not tempted by anything like America’s Smoot-Hawley Tariff Act, which crippled world trade in 1930. Germany, the Netherlands, Austria, and Finland remain committed to the European Union’s single market for goods and services (though their national regulators hinder intra-European capital flows). Still, one cannot help but notice similarities with the 1930’s. At the time of the Great Crash, the United States and France were piling up gold as fast as the Weimar Republic was piling up unemployment. Today’s northern European countries are running up record current-account surpluses, just as some southern European countries are experiencing Weimar-level unemployment. For Italy, Europe’s fourth-largest economy, the current slump is proving to be deeper than the one 80 years ago. Meanwhile, huge savings and potential demand for consumer and capital goods remain locked up next door. How did this happen? As Kemal Derviş has pointed out, the cumulated current-account surplus of the Scandinavian countries, the Netherlands, Austria, Switzerland, and Germany is now around $500 billion. This dwarfs China’s surplus at its mercantilist peak of the mid-2000’s, when the G-7 (including Germany) regularly scolded the Chinese for fueling global imbalances. Read Europe in Depression? here .
  • Planet Money Podcast: "How Much Should We Trust Economics?"

    The latest Planet Money podcast features an interview with Thomas Herndon . Herndon attracted a lot of attention last week . He's the University of Massachusetts graduate student who discovered an error in Carmen Reinhart and Kenneth Rogoff 's influential paper on government debt. The error prompted the Planet Money team to ask, "How much should we trust economics?" Take a listen:
  • UMASS Economists' Critique of Reinhart/Rogoff's Work on Debt

    Carmen Reinhart and Kenneth Rogoff 's paper, Growth in a Time of Debt , has been required reading for policy makers in developed economies, and it is seen as highly influential in the debate over austerity. After the authors' methods were called into question, Rogoff and Reinhart looked over their work, and found an error. But they still stand by their conclusions (FT, sign-in required). Thomas Herndon , Michael Ash , and Robert Pollin are the economists who highlighted some key issues with Reinhart and Rogoff's work. In Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogo ff , the authors write that they "find that coding errors, selective exclusion of available data, and unconventional weighting of summary statistics." Here is a sample of their critique: To build the case for a stylized fact, RR stresses the relevance of the relationship to a range of times and places and the robustness of the rounding to modest adjustments of the econometric methods and categorizations. The RR methods are non-parametric and appealingly straightforward. RR organizes country-years in four groups by public debt/GDP ratios, 0{30 percent, 30{60 percent, 60{90 percent, and greater than 90 percent. They then compare average real GDP growth rates across the debt/GDP groupings. The straightforward non-parametric method highlights a nonlinear relationship, with effects appearing at levels of public debt around 90 percent of GDP. We present RR's key results on mean real GDP growth from Figure 2 of RR 2010a (below) and Appendix Table 1 of RR 2010b in Table 1 (here). Figure 2 in RR 2010a and the first line of Appendix Table 1 in RR 2010b in fact do not match perfectly, but they do deliver a consistent message about growth in time of debt: real GDP growth is relatively stable around 3 to 4 percent until the ratio of public debt to GDP reaches 90 percent. At that point and beyond, average GDP growth drops sharply to zero or slightly negative. A necessary condition for a stylized fact is accuracy. We replicate RR and that coding errors, selective exclusion of available data, and unconventional weighting of summary statistics lead to serious errors that inaccurately represent the relationship between public debt and growth among these 20 advanced economies in the post-war period. Our most basic finding is that when properly calculated, the average real GDP growth rate for countries carrying a public debt-to-GDP ratio of over 90 percent is actually 2.2 percent, not 0:1 percent as RR claims. That is, contrary to RR, average GDP growth at public debt/GDP ratios over 90 percent is not dramatically different than when public debt/GDP ratios are lower. Download the paper here .
  • British Economy and the Dreaded Triple Dip

    Britain's economy shrank again in the fourth quarter of 2012, according to the United Kingdom's Office of National Statistics , sparking concerns there of a triple-dip recession. Here are some of the key takeaways from the release: • GDP was estimated to have decreased by 0.3% in Q4 2012 compared with Q3 2012. • Output of the production industries was estimated to have decreased by 1.8% in Q4 2012 compared with Q3 2012, following an increase of 0.7% between Q2 2012 and Q3 2012. • Construction sector output was estimated to have increased by 0.3% in Q4 2012 compared with Q3 2012, following a decrease of 2.5% between Q2 2012 and Q3 2012. • Output of the service industries was estimated to have been flat in Q4 2012 compared with Q3 2012, following an increase of 1.2% between Q2 2012 and Q3 2012. • GDP was estimated to have been flat in Q4 2012, when compared with Q4 2011. Not a pretty picture. Here's a look at GDP and main components since 2000: Read the full release here . And at the Mirror , Graham Hiscott says Britain might have already been in the third dip of the triple dip recession had London not hosted a pretty big party this past summer: Does the Chancellor have a Jessica Ennis poster on his wall at the Treasury? If not, he should, because if it weren’t for Team GB’s heroics and the big boost from the Olympics, it’s likely the UK would already be stuck in a triple dip recession. The Games - and the surge in spending - were a fig leaf for problems plaguing our economy. Today’s figures showing the economy shrank 0.3% in the fourth quarter of 2012 were a case of business as usual for battered Britain. Take out the Olympic bounce, and the economy has shrunk for four of the past five quarters. Hardly a gold medal winning performance. Read the full article here .
  • Roubini's Outlook for 2013: "Downside risks to the global economy are gathering force"

    As President Obama launches into his second term, getting the economy moving remains among his top priorities. It is not the challenge he faced four years ago, when we were just months removed from the near global economic meltdown of September 2008. Rather, it may look very similar to last year: slow growth around the globe. But, according to Nouriel Roubini , there will be some "important differences , " that might lead us to prefer slow growth to the alternative. In a piece for Project Syndicate , Roubini raises concern that, "given synchronized fiscal retrenchment in most advanced economies, another year of mediocre growth could give way to outright contraction in some countries." With growth anemic in most advanced economies, the rally in risky assets that began in the second half of 2012 has not been driven by improved fundamentals, but rather by fresh rounds of unconventional monetary policy. Most major advanced economies’ central banks – the European Central Bank, the US Federal Reserve, the Bank of England, and the Swiss National Bank – have engaged in some form of quantitative easing, and they are now likely to be joined by the Bank of Japan, which is being pushed toward more unconventional policies by Prime Minister Shinzo Abe’s new government. Moreover, several risks lie ahead. First, America’s mini-deal on taxes has not steered it fully away from the fiscal cliff. Sooner or later, another ugly fight will take place on the debt ceiling, the delayed sequester of spending, and a congressional “continuing spending resolution” (an agreement to allow the government to continue functioning in the absence of an appropriations law). Markets may become spooked by another fiscal cliffhanger. And even the current mini-deal implies a significant amount of drag – about 1.4% of GDP – on an economy that has grown at barely a 2% rate over the last few quarters. Second, while the ECB’s actions have reduced tail risks in the eurozone – a Greek exit and/or loss of market access for Italy and Spain – the monetary union’s fundamental problems have not been resolved. Together with political uncertainty, they will re-emerge with full force in the second half of the year. After all, stagnation and outright recession – exacerbated by front-loaded fiscal austerity, a strong euro, and an ongoing credit crunch – remain Europe’s norm. As a result, large – and potentially unsustainable – stocks of private and public debt remain. Moreover, given aging populations and low productivity growth, potential output is likely to be eroded in the absence of more aggressive structural reforms to boost competitiveness, leaving the private sector no reason to finance chronic current-account deficits. Read The Economic Fundamentals of 2013 here .
  • The British Economy and Challenging the Austerity Narrative

    Fantastic storytelling from Adam Davidson in the New York Times about visiting the Bank of England and meeting with Monetary Policy Committee member Adam Posen. But Davidson's story is also about, well, storytelling and how it is applied to decision making at one of the most influential global financial institutions. It seems Posen has been fighting against the tide within the BofE and losing because his math hasn't squared with the narratives his fellow committee members have bought into: Economics often appears to be an exercise in number-crunching, but it actually resembles storytelling more than mathematics. Before the members of the Monetary Policy Committee gather for their monthly meeting, they sit through a presentation from the Bank of England’s economic staff. The staff members take the most recent economic data — G.D.P. growth, the unemployment rate and more subtle details gathered from interviews with businesspeople throughout the country — and try to fashion it into a narrative. Does a sudden spike in new factory orders represent a fundamental shift, or is it just a preholiday blip? Do anecdotal reports of rising food prices herald a period of inflation, or is it the result of a cold snap? Which story feels truer? A few days later, each of the nine members of the M.P.C. puts forth his or her own interpretation. Over two days, the members debate these competing narratives and discuss what the Bank of England should do. Then the committee votes, and the winning policies are implemented. Soon after Cameron was elected, Posen argued that the committee should endorse a more radical, expansionary approach of economic recovery. He believed that the data indicated the sputtering would end and the economy would grow only if the Bank of England began buying many billions of pounds’ more worth of bonds. This added stimulus would flood the banking system with new cash and indirectly push banks to lend to businesses and citizens. (Banks don’t make money by sitting on cash.) Some of Posen’s colleagues warned that this would lead to inflation. He countered that the economy was operating below its capacity, so there was no reason to fear inflation. Each month, the committee heard Posen’s advice. Each month, it voted 8 to 1 against him. The bank eschewed his more expansionary suggestions and stuck to a more conservative approach of keeping interest rates low and modest bond-buying. Soon Posen became a famously divisive figure in London’s financial community, alternatively the enlightened genius trying to save the country and the mad Yank who wanted to inflate the pound out of existence. “There was this period,” he remembers, “when I would lie awake at night and think: Am I just crazy? Maybe I’m nuts. It’s like the scene in ‘12 Angry Men.’ I almost wavered. But then I decided: No, no, no. I was convinced: They’re nuts and I’m right.” Read God Save the British Economy here .
  • UK Austerity Measures to Continue

    The economic situation in Britain has mirrored a London winter day: gray and bleak. And it may be worse than a lot of us have realized. Chancellor of the Exchequer George Osborne addressed Parliament earlier this week and reported that the government is anticipating an extension of austerity measures beyond 2015. The Economist 's John Prideaux and Jeremy Cliffe discuss the impact of Osborne's address on the British economy and beyond:
  • A New Model for Fighting Debt: Treating Greece as a Charity Case

    Peter Nomikos is a very, very wealthy Greek businessman, and he believes he has a solution to his country's debt crisis. Nomikos, heir to a shipping fortune, has set up a charitable organization and is asking all Greeks to donate and pay down the countr's debt. We're not convinced this will work, but it is worth watching, and Nomikos deserves credit for at least trying another path. Der Spiegel interviewed Nomikos about Greece Debt Free , and asked him why his plan is better than just getting all Greeks to pay their taxes: Nomikos : The difference is that with taxes, you don't know what they are being used for. There is a lack of trust in the state, and I am not going to pretend that I can solve this cultural problem. But Greeks are also great patriots, and I think we should harness this feeling. A euro for "Debt-free Greece" is not a euro in taxes lost. It is complementary. SPIEGEL ONLINE : What is the reaction from the Greek government? Nomikos : Many people in the government and the diplomatic community find our campaign very encouraging. But remember, we are non-political and non-governmental. It is the first real show of a private Greek citizen to organize other Greeks to address our biggest problem. It shows to the world that we are taking initiative. SPIEGEL ONLINE : You established the foundation in the US state of Delaware. Why not in Greece? Nomikos : In Greece, I couldn't be sure the money would remain untouched. Also, being a US charitable foundation means that American taxpayers can deduct any donation from their taxes. It is an incentive for the wealthy Greek diaspora in the US. SPIEGEL ONLINE : And for other nationalities as well? Nomikos : Any friend of Greece is welcome. Originally, I thought mainly diaspora Greeks would participate. But there has been a huge amount of interest from the business community within Greece. Some companies are marketing their products with our slogan "Debt-free Greece" and pay part of the profits into our campaign. Read the full interview here .