Abstract

The sovereign debt crisis is often evoked as one of the main causes of the economic difficulties faced by net importing countries and as the rationale behind the austerity measures imposed on their residents. Nothing seems more evident than a country whose global,
commercial and financial, imports exceed its global exports has to finance its deficit through a foreign loan. This inevitably leads to the formation of an external debt. Yet, things are less straightforward than they might appear, and a rigorous analysis is called for to verify whether any country’ sovereign debt is ever justifiable. The paper shows that it is because net global imports are paid twice that net importing countries run up a sovereign debt. The case of Spain is symptomatic and provides statistical confirmation of the pathological increase in the country’s external debt.