Is the recently-announced debt-reduction plan for Greece a viable solution to the most serious financial problem facing the world economy today? The example of Jamaica – the land of sun, sea and sand – could be a good indication of what might be expected to follow. Or is it?

Back in 2009 Jamaica faced its own crisis of a potential bankruptcy due to the inability of the Government of Jamaica (GoJ) to pay its maturing debt. After some hard negotiations, local bondholders agreed to a debt-exchange programme called the Jamaica Debt Exchange (JDX) in which high interest earning instruments were swapped for bonds with lower yields and longer maturities. This gave the Government some fiscal breathing space. And the result? The macro-economic variables since then point to record low interest rates, improved balance of payments results, a stable exchange rate, increased net international reserves, low inflation, a sustained rise in the stock-market and a return to economic growth. EBS Economics students will recognise these as being some of the results achieved when the “crowding out” effect of Government in the economy is reduced.

Read more... http://www.ebsglobalblog.net/economics/macroeconomics/2011/11/11/follow-the-sun/