Human Wrongs Watch
By Tony Robinson*, Pressenza
3 February 2015 — How can it be that when a country is in financial difficulty, “Market Forces” say that a country has to pay higher interest to borrow money? If there were any international solidarity a country should have to pay less interest when it is in financial difficulty, or even no interest, or at the very least it should pay the same as anyone else.
Taking the example of Greece, her bonds today were trading at 11.4% for a ten year bond, whereas German government bonds were trading at 0.31%.
Bonds are essentially loans. A country issues a bond (debt) and an investor buys it. The rate of interest is agreed by the “Market”.
The investor gives their money to the bond issuer and the issuer uses the money for what they like, either it can be to finance long term development projects which might generate a profitable source of income, or it might be for short term needs, like paying salaries of public sector employees.