| European sovereign debt crisis refers to the crisis originated in Greece, developed in Ireland, Portugal, Spain and Italy (hereinafter called "PUGS"). Debt crisis is a widespread form of the financial crisis, most of which ended in debt default and debt restructuring. The direct reason of the sovereign debt crises occurred in Europe is the risk of assets and liabilities management. The dissertation analyzes the debt crisis in Europe from the perspective of finance and accounting, and argues that the government assets and liabilities management risk,which caused by the economy and society development model and welfare state model are the main causes of the crisis. Meanwhile government accounting model based on cash basis is not the root cause of the crisis, but one of the important causes. China should learn from the crisis, accelerate the transformation of economic development pattern, therefore, this study has important practical and theoretical significance.This dissertation is based on theoretical foundation of modern economics, finance, and use historical, comparative, theoretical and empirical analysis methods comprehensively to analyze on the related issues of European sovereign debt crisis. The main contributions of this dissertation includes the following:first of all, analyze the balance sheet of PⅡGS, and then construct the analyzing framework of the crisis based on the Mundell-Fleming Model to carry on the analysis of the crisis formation mechanism, and also explore the role which economic development pattern plays in the formation of the crisis. Next, this dissertation adopts PVAR model in econometrics’theory, to carry on an empirical test of the formation mechanism of the European sovereign debt crisis through regression test, impulse response analysis and variance decomposing method, and confirms the conclusion that the current account deficit caused by unreasonable economic structure as well as the government financial deficit caused by the high welfare are the main and root reason for the rising sovereign debt, and ultimately lead to a sovereign debt crisis. This dissertation then puts forward that, the root cause of the long-term current account deficit and fiscal deficit in Greece and other countries is not external factors, but the internal unsustainable economic and social development model, including the unsustainable economic development model and the welfare state model; Third, the dissertation argue that although the government accounting based on cash basis is not the direct cause of the crisis, it played an important role in the outbreak of the crisis. And transform from cash basis to accrual basis is important tc prevent the crisis which is encouraged by IFAC. Fourth, summarizing China’s development model, systematically analyzing its practical difficulties and challenges, as well as how to maintain the sustainability, and providing targeted policy recommendations.The main content of this dissertation are as follows:First, this dissertation analyzes the causes of sovereign debt continued accumulation in the ’PUGS’ based on the Mundell-Fleming Model. The author thinks that the direct cause of the outbreak of sovereign debt crisis in the’PUGS’is the massive accumulation of sovereign debt, but the root causes leading to debt accumulation can’t simply be attributed to external factors such as euro defects, the global financial crisis, the American deliberate suppression or global economic imbalances. Based on the amended Mundell-Fleming Model, the long-term debt of Greece and other countries continued to rise mainly due to two factors:the constant increase of the current account and fiscal deficits. In the European single-currency zone, Greece and other countries lost their method of filling the gap through the issuance of currency, therefore, they had no choice but borrow heavily to fill the gaps in the balance of payments and domestic fiscal revenue and expenditure. A lot of debt interest payments exacerbated the imbalance of payments through the current account, leading to further large-scale borrowing. The continued increase of sovereign debt led to the constant rising of sovereign credit risk. In the face of capital outflows, Greece and other countries had no choice but raise interest rates to attract capital inflows, but when interest rates raised far beyond market expectations, interest rates had negative elasticity on capital flows, that is, no matter how high the interest rates were, the outflow of capital couldn’t be stopped, then the sovereign debt crisis broke out. Therefore, euro defects and the global financial crisis are only external causes for the outbreak of sovereign debt crisis in Greece and other countries, the internal cause is the long-term accumulation of current account and fiscal deficits.Second, through a comparative analysis, this dissertation further argues that the root cause for the long-term current account and fiscal deficits in Greece and other countries does not lie in external factors, but in their internal unsustainable economic and social development model. The economic and social development model for European countries can be divided into four types:the Nordic model, the Rhine model, the Anglo-Saxon model and the Mediterranean model. In this European sovereign debt crisis, the Mediterranean (Southern Europe) countries became the ’disaster area’, while countries of the Nordic model and the Rhine model maintained fine economic conditions, they was not only hit by sovereign debt crises, but also played the role of relief for southern European countries. European sovereign debt crisis is not just debt crisis, currency crisis, banking crisis and industrial structure crisis, in terms of the root cause, it is the economic and social development model crisis in southern European countries. The sustainability of the development model of Greece and other countries showed in the following two aspects:first, the unsustainable economic development model led to the industrial hollowing of the southern European countries; second, the excessive social security system led to higher labor costs in southern European countries, which limited their competitiveness. In the case of European monetary integration, the sovereign debt of the southern European countries has become a veritable "hard debt", losing the possibility of debt monetization; therefore, the economic and social development model crisis eventually broke out in the form of sovereign debt crisis.Third, from the perspective of the economic development model, the characteristics of the European economic development model are mainly internal imbalance. Specifically speaking, the’PUGS’have weak economic competitiveness, unbalanced industrial structure, poor innovation capability and domestic-oriented economy. They are the’non-core countries’ in the euro area, and the’Rhine model’constitutes the’core countries’ of the euro area. The ’core countries’are in the central position, while the’non-core countries’are in the dependent position. During competition, the’core countries’pursued the export-oriented economic growth policy, that is the’beggar-thy-neighbor’policy’at the cost of economic balance and debt accumulation of non-core countries’, which led to the current account surplus in’core countries’as well as the current account deficit in’non-core countries’. Therefore, the government departments of’non-core countries’increased expenditure to stimulate economic growth in order to get rid of competitive disadvantage, which inevitably led to budget deficits and debt accumulation. This imbalanced development model eventually led to the sovereign debt crisis. From the post Keynesian perspective, the outbreak of debt crisis is the result of external economic imbalances instead of its cause, and the external economic imbalances are caused by imbalances of the economic development model of the euro-zone countries.Fourth, from perspective of the welfare state model, the’PUGS’belong to the European welfare state model, especially after joining the euro zone, their welfare catch-up characteristics are very obvious. There are two sources supporting the welfare catch-up: public borrowing and EU assistance. Measuring with the’moderate’ social security expenditure level, the social security expenditure level of the’PⅡGS’are commonly ’excessive’. The moderate social security expenditure level in Greece is13.9%, while the actual level is21.3%,53%higher than the moderate level. The actual social security expenditure level in Ireland, Portugal, Spain and Italy are50%-80%higher than the moderate level. The’excessive’social security expenditure level in the’PIIGS’can also be confirmed from the change of social security expenditure growth. From2007to2010, tax revenues in Greece, Ireland, Portugal, Spain and Italy respectively have decreased by4.0%,30.6%,5.4%,19.6%and3.2%respectively, while their social security expenditures have increased by18.2%,23.9%,21.0%,29.6%and12.2%.’Excessive’ social security expenditure level does not only make the national finance unable to make ends meet, but also has negative effect on economic development. The economic effects generated by’excessive’ social security expenditure level include:raising labor costs, resulting in welfare dependency, leading to industrial transfer and industrial hollowing, decreasing savings rate, inhibiting the economic vitality, limiting the economic growth, so the fiscal revenue source is getting less and less, while the fiscal spending is getting heavier and heavier, which makes the government debt burden getting heavier and heavier, and ultimately break out the sovereign debt crisis.Fifth, the dissertation analyzes the government balance sheet risk from perspective of the government accounting model."The accounting is reflective", in order to manage the risk of government balance sheet, information of government assets and liabilities are needed which should be provided by the government accounting system. But in Europe, Greece government provided the false accounting information which escaped the supervision of the Union, and led to the accumulation of risks and went to the crisis at the end. Although the government accounting reform based on accrual system would not solve the crisis directly, it could provide more accrute accounting information, which could prevent the outbreak of crisis. That is why the IFAC encourage every country to execute the reformation of government accounting based on accrual system, and encourage the reformation of accounting information disclosure as well.Sixth, the European debt crisis reflects an economic and social development model crisis, which is of important significance for China’s economic transformation and upgrading as well as acceleration of development model adjustment:First, China should change the economic and social development model without delay. To bid farewell to the non-equilibrium growth mode, China should reduce the dependence of the entire economic and social system operation on the growth rate as a breakthrough; Second, China should deepen its financial system reform, focusing on the coordination of political and financial economic development; Third, China should strengthen the supervision of the government financing platform, effectively control Chinese government debt risk; Fourth, it should be prudent to push forward the process of internationalization of the RMB; Five, China should act according to its ability and establish the welfare model and the social security system in line with China’s national conditions. |
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