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recent analyses, carried out in conjunction with the establishment of the new BRICS bank, have demonstrated the woeful inadequacy of official assistance and concessional lending for meeting Africa’s infrastructure needs, let alone for achieving the levels of sustained growth needed to reduce poverty significantly.

the conditionality and close monitoring typically associated with the multilateral institutions make them less attractive sources of financing. What politician wouldn’t prefer money that gives him more freedom to do what he likes? It will be years before any problems become manifest – and, then, some future politician will have to resolve them.

So, are shortsighted financial markets, working with shortsighted governments, laying the groundwork for the world’s next debt crisis?

he risks will undoubtedly grow if sub-national authorities and private-sector entities gain similar access to the international capital markets, which could result in excessive borrowing.

Signs of default stress are already showing. In March 2009 – less than two years after the issue – Congolese bonds were trading for 20 cents on the dollar, pushing the yield to a record high. In January 2011, Côte d’Ivoire became the first country to default on its sovereign debt since Jamaica in January 2010.

In June 2012, Gabon delayed the coupon payment on its $1 billion bond, pending the outcome of a legal dispute, and was on the verge of a default. Should oil and copper prices collapse, Angola, Gabon, Congo, and Zambia may encounter difficulties in servicing their sovereign bonds.

They need not only to invest the proceeds in the right type of high-return projects, but also to ensure that they do not have to borrow further to service their debt.

But borrowing money from international financial markets is a strategy with enormous downside risks, and only limited upside potential – except for the banks, which take their fees up front. Sub-Saharan Africa’s economies, one hopes, will not have to repeat the costly lessons that other developing countries have learned over the past three decades.

The Greek government chose to apply so-called collective action clauses, which it had earlier inserted into its bonds registered under Greek law. The deal maximized total debt relief for the country,

Since then, banks and regulators have taken steps to strengthen the market, mostly by making sure that investors can pay out the money they owe on swaps.

Nearly $70 billion of swaps are currently outstanding on Greek debt. But after both sides settle their accounts, the amount that will need to be paid out should be no more than $3.2 billion.

Some investors entered swaps on Greece as a way of effectively insuring themselves against losses on their Greek bonds, while others used them as a way to bet on a default happening.

Banks can still access emergency funds through the Greek central bank, but at a higher interest rate than normal ECB loans. The credit risk stays on Greece's books and isn't spread throughout the 17-member currency bloc,

Had the ECB operated from the outset under a rule prohibiting it from accepting SGP-noncompliant countries’ debt as collateral, the entire eurozone sovereign-debt problem might have been avoided.

the expansion in the US took place at the federal level, where spending today amounts to 24% of GDP, compared to just 1.2% of GDP for the European Union budget.

The point is that the enforcement mechanism would be truly automatic: market interest rates would provide the discipline that bureaucrats in Brussels cannot.

Of course, the eurozone cannot establish a blue-bond regime without first solving the problems of debt overhang and troubled banks. Otherwise, the plan itself would be destabilizing, because almost all countries would immediately be in the red.

Look beyond the debt crisis and take the longer view. European growth has been slowing for 40 years. During this period its share of global gross domestic product has shrunk by 10 percentage points; that of the US has held steady.

After the fall of the Berlin Wall, chancellor Helmut Kohl offered the D-Mark to President François Mitterrand in exchange for French acceptance of German reunification. This noble gesture of self-containment was not, of course, an entirely selfless act. As part of a hard-headed bargain in return for giving up the symbol of German economic primacy, Europe’s monetary and fiscal policy would be “Germanised”.

Mr Weidmann is right to fear the moral hazard contemplated by the ECB and its lackadaisical allies from Madrid to Berlin.

The Maastricht Treaty took it for granted that only the public sector can produce chronic deficits. It assumed that financial markets would always correct their own excesses

For instance, they treated the euro crisis as if it were a purely fiscal, i.e., budgetary, problem. But only Greece qualified as a genuine fiscal crisis. The rest of Europe suffered largely from banking problems and a divergence in competitiveness, which gave rise to balance of payments problems.

The eurozone could face a major crisis at short notice if either country experiences serious trouble selling government paper, which both must do in large volume and on a continuing basis.

The avoidance of default on the core sovereign debt, the debt undertaken without duress by the Irish State, is a legitimate objective of national policy.

It had become clear, early in 2010, that the blanket bank guarantee would bankrupt the Irish State, and the Government finally began to acknowledge that haircuts for senior, but unsecured, bank bondholders had become unavoidable.

Most delicate will be whether the Spanish banks receiving the largest cash injections, like the nationalized mortgage giant Bankia, will be forced to impose losses on holders of their subordinated bonds. Those are the investors whose bonds are not backed by collateral and are thus considered more risky.

In Spain, though, the problem is that 62 percent of the holders of Bankia’s subordinated debt are Spanish individual investors, not overseas hedge funds and investment banks. It is not likely that Madrid will be willing to hit those citizens with a 65 percent loss — the loans are currently priced at about 35 cents on the dollar — at a time of 25 percent unemployment in the country.

“There are compelling reasons for the euro zone to insist on losses for subordinated and even senior bondholders, the least of which is a reduction in moral hazard,” said Adam Lerrick, an expert on banking and sovereign debt at the American Enterprise Institute. “Losses for bondholders is now euro zone policy, so Europe’s credibility is also at stake.”

“Sixteen hundred jobs a week were being lost before we took office; we’re now in a position where 1,200 jobs a week are being created, and our consumer confidence numbers have been steadily growing.”

For the euro zone at large, though, a step back often follows each step forward. France and Italy, the bloc’s second- and third-largest economies, are increasingly seen as the latest sick men of the Continent. Even Germany, the bloc’s powerhouse, grew only feebly last year, by 0.4 percent.

In Ireland, more than 80 percent of the investment came from abroad, with banks and pension funds making up 37 percent of the offering and fund managers about half.

Mr. Kirkegaard cited “the hunt for yield.”

The ECB’s Outright Monetary Transactions programme was instrumental in reducing Spanish government bond yields. This alleviated the Spanish fiscal position, but did not make it sustainable. The continuing unsustainability of the Spanish government debt has to do with two factors: First while r (the interest rate) declined, g (nominal growth) remained much lower in Spain than in the UK. The latter was due to the deflationary forces in the Eurozone – themselves a result of excessive austerity and the absence of currency depreciation (which was made possible in the UK thanks to the expansionary monetary policies of the Bank of England).

The crisis is almost entirely self-inflicted. It has the quality of a nightmare.

My interpretation of the euro crisis is very different from the views prevailing in Germany. I hope that by offering you a different perspective I may get you to reconsider your position before more damage is done. That is my goal in coming here.

For instance, the Maastricht Treaty took it for granted that only the public sector could produce chronic deficits because the private sector would always correct its own excesses. The financial crisis of 2007-8 proved that wrong.

Only at the end of 2009, when the extent of the Greek deficit was revealed, did the financial markets realize that a member country could actually default. But then the markets raised the risk premiums on the weaker countries with a vengeance.

Then the IMF and the international banking authorities saved the international banking system by lending just enough money to the heavily indebted countries to enable them to avoid default but at the cost of pushing them into a lasting depression. Latin America suffered a lost decade.

In effect, however, the euro had turned their government bonds into bonds of third world countries that carry the risk of default.

he fact that Greece blatantly broke the rules has helped to support this attitude. But other countries like Spain and Ireland had played by the rules;

As soon as the pressure from the financial markets abated, Germany started to whittle down the promises it had made at the height of the crisis.

Losing the privilege of issuing eurobonds and having to pay stiff risk premiums would be a powerful inducement to stay in compliance.

There are also widespread fears that eurobonds would ruin Germany's credit rating. eurobonds are often compared with the Marshall Plan.

They would survive on limited support from European Structural Funds and remittances