We borrow today, because we are confident that the income will come tomorrow. How can debt be reduced? While the financial crisis in 2008 brought debt growth to a sudden halt in some countries, debt growth continues to outpace income growth for Norwegian households. This can hardly go on forever. If debt needs to be reduced, the question is how? Sovereign borrowers can levy taxes and thereby have a reliable source of revenue. Even so, being the creditor of a sovereign can be risky. In 1918, after the Russian Revolution, the Bolsheviks repudiated all debt issued by the previous regime. French investors, among them many small savers, held nearly half of the Russian national debt at the beginning of the First World War. They were among the first big losers of the Russian Revolution.2 In the inter-war period, these losses had consequences for French foreign policy. France became a fierce opponent of the Soviet regime. The losses on Tsarist bonds may have also contributed to France’s unwillingness to restructure German debt after the war. Germany’s debt burden contributed to the hyperinflation of the 1920s and the fall of the Weimar Republic. Now, on the evening of 9 April, 79 years after the German invasion of Norway, we can conclude that debt m have fateful consequences. After Boris Yeltsin raised the Russian flag in 1991, the French creditors returned. Old bond certificates were retrieved from drawers. A final settlement was agreed in 1996.
Mugur Isărescu: In support of central bank independence Address by Mr Mugur Isărescu, Governor of the National Bank of Romania, at the Conference on “The role of a central bank in modernising society – challenges in emerging economies”, organised by the National Bank of Moldova, Bucharest, 7 April 2021. * * * Dear Governor Armașu, Distinguished guests, adies and gentlemen, Good morning, Let me start by congratulating the National Bank of Moldova on the initiative of holding this conference. I believe that discussions on the proposed topic are welcome at the current juncture, when light needs to be shed both on the measures to rescue the economies hit by the COVID-19 pandemic and on central banks’ mission. The question about what a central bank can and cannot do is always on the agenda. Governments and central banks throughout the world have promptly stepped in to address the fallout from the pandemic by means of social, economic, fiscal and monetary policies. Such comprehensive and unprecedented support has proven that, in situations like this, the concerted action of the authorities – particularly monetary and fiscal ones – is critical to safeguarding the smooth functioning of markets, of economic and social mechanisms. The topic of this roundtable, The role of a central bank in modernising society – challenges in emerging economies, is however more comprehensive than the response to the challenges of the unprecedented medical crisis we are currently facing.