Greece wants to index bond payments to economic growth. Not a bad idea
THE tie-less leaders of the new Greek government are short of neckwear but not of off-beat policy ideas. Their talk of reversing some hard-fought budget cuts, most notably by rehiring hordes of sacked bureaucrats, put markets in a panic. But the “smart debt engineering” mooted by Yanis Varoufakis, Greece’s new finance minister, shows more promise. At the heart of his proposal is a plan to swap lots of existing Greek debt for “GDP-linked bonds”–an old idea whose time may at last have come.
Since the 1980s globalization has sent periodic surges of capital from the rich world to sovereign borrowers in the developing world. Many were ill-equipped to cope. Borrowing binges often ended in crises, prompting economists to think about ways to make swimming in the torrent of global capital less dangerous.
Indebted economies are more likely to get into trouble when the economic outlook changes. During booms borrowing often seems attractive to leaders, who reckon that rising incomes will make servicing the debt a doddle. Commodity exporters make similar calculations when the prices of oil, metals and the like go up. But good times inevitably end, dashing the borrowers’ assumptions and making their debts more difficult to bear.
The solution, as many economists have suggested over the years, is to link the interest on government debt to an economic variable such as net exports or GDP growth. A country with an average growth rate of 3% might sell bonds which pay 9% interest when GDP grows by 5% per year, for instance, and 1% interest when GDP grows by 1% per year. This approach would leave governments with smaller payments to creditors during rough economic periods and bigger bills in times of plenty. That, in turn, could help prevent government from resorting to “pro-cyclical” fiscal policy, whereby they exacerbate both busts, by slashing spending, and booms, by bingeing.
Linking bond payments to GDP should also make a country’s debt-to-GDP ratio less prone to sudden jumps, and thus lower the odds of a debt crisis. The total amount paid out over the life of a GDP-linked bond would vary according to the growth rates enjoyed during that period. A long boom would mean bigger payments to creditors. That would leave the government in question with less revenue to redeem debt, and thus a higher debt-to-GDP ratio than it would otherwise have had. But in a slump, a government that had issued lots of GDP-linked bonds would pay far less interest, and would not have to issue so much new debt to cover its costs. That might save it from a vicious cycle in which interest payments and total borrowing chase one another ever higher.
In a working paper published last year, the Bank of England argued that such automatic moderation would be especially valuable not only to poorer countries, but also to members of currency unions.* In such places, the authors reckon, debt of more than 90% of GDP leads to a loss of confidence in a government’s ability to repay, and thus higher borrowing costs and a downward debt spiral. GDP-linked bonds, in contrast, give governments much more fiscal space: markets might not panic until debt ratios approach 150-200% of GDP, the authors suspect.
Despite these potential advantages, GDP-linked bonds are rare. Mexico has issued debt with payments linked to oil prices, but such instruments have mainly been used in restructurings. In 2002 Argentina issued GDP-linked warrants to investors who had held Argentine debt before its default the previous year. There was no principal associated with the warrants; instead, the government made dividend-like payments which varied with the performance of Argentina’s economy. Greece itself issued GDP warrants in 2012, as part of the package offered to participants in its first debt restructuring.
Why aren’t GDP-linked bonds more common? One reason may be the additional risk creditors are asked to assume. With conventional bonds, it is the issuer who pays the price if an economy fails to grow as expected. GDP-linked bonds transfer that risk to the lender, who would naturally demand higher interest in return. The average interest rate over the life of a GDP-linked bond should therefore be higher than on a conventional bond.
However, some research suggests that the premium investors would demand might not be so big. Different countries grow at different rates and on different cycles, so the risk of disappointing growth should be easy to minimize through diversification.
Another potential headache–that the issuing governments might diddle their growth numbers to minimize their payments–is harder to get round. There is much skepticism about Argentina’s economic data, for example. Fears of statistical funny business would presumably also add to the premium investors would demand.
The trouble then becomes persuading governments to accept higher borrowing costs during good times, when conventional debt is often available on good terms. Any regime willing to accept the short-term pain this would entail for uncertain long-term gains is prudent almost by definition, and therefore less likely to need the insurance GDP-linked bonds provide.
Yet even if they do not take the world by storm, GDP-linked bonds could find a home within the euro area. A transnational agency, Eurostat, oversees European economic statistics (although that did not prevent Greece from fudging its budget numbers before the euro crisis). Given the constraints of a shared monetary policy and restrictions on budget deficits, euro-area governments have less wriggle-room than their counterparts elsewhere. Flexible debt instruments could help.
“Linked in; Free exchange.” The Economist 7 Feb. 2015: 72(US). Business Insights: Essentials. Web. 30 Aug. 2021.
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Leadership consists of
various qualities, skills and aspects relating to the action of leading an
organization or a group of individuals (Ennis et al, 2013). The focal point of
the NHS is to enable cultures that provide safe, compassionate and high-quality
care (West et al, 2015). Furthermore, leadership has an impact on a number of
different aspects such as mortality levels, patient satisfaction, staff
well-being, financial performance and generally, the quality of care (West et
al, 2015). The Francis report discussed the importance of distributed
leadership, whereby all healthcare professionals are enabled to think freely,
make decisions and take control themselves. It leads to the provision of
high-quality care (Francis, 2013). This piece of work will assess effective
leadership and why it is a necessity within nursing practice.
Ennis et al (2013) implemented
a study in order to assess the communication characteristics needed for good
leadership within nursing. Interviews were carried out, outlining how effective
communication is key in order to provide high quality care, develop as a
professional and to harbor working relationships (Ennis et al, 2013). The study
produced the following themes: choice of language, listening skills, relevance,
non-verbal communication and relationships. Participants outlined that good
leaders have the knowledge to choose the type of language used and can adapt it
to any scenario that they are faced with. In addition, they suggest that an
effective leader considers the outcome and consequence of each conversation
(for example, whether further support was needed) (Ennis et al, 2013). When
leadership is successful, it enables excellence and ethical and
patient-centered care (Ennis et al, 2013).
Furthermore, it was
noted that good leaders needed to be able to listen, be affable and have
patience (Ennis et al, 2013). One participant outlined that listening should be
first and foremost, valuing its importance and showing great interest in what
the patient has to say (Ennis et al, 2013). Respondents noted the need for
effective communication across all aspects of nursing; with junior staff,
between healthcare professions and when directly caring (Ennis et al, 2013).
Good clinical leaders need to be able to communicate to a high level, adapting
to enable all patients to understand, noting body language, non-verbal cues and
avoiding medically complex terms as much as possible (Ennis et al, 2013). The
study notes the link between effective communication and the amount of
influence that leader has, the team’s performance and their development of
staff member relations (Ennis et al, 2013). Guidelines by NICE also emphasize
the importance of effective communication to enable high quality care (NICE,
2016). Non-verbal communication is also key; effective leaders need to note
their body language and level of eye contact, assessing not only their own
non-verbal cues, but also those of the patient or fellow professional (Ennis et
al, 2013). This will enable them to judge the scenario and to foresee any
issues that may arise (Ennis et al, 2013). Within the study by Ennis et al,
(2013) respondents outlined that good leaders had excellent people skills,
building a good rapport with everyone. To do so, respect and treating each
person as an individual is key (Ennis et al, 2013). It is also vital to ensure
that no judgements are made and that support is offered when needed (Ennis et
al, 2013). Effective leaderships can only be implemented when these areas are
adhered to, building work relationships and providing high quality,
patient-centered care (Ennis et al, 2013).
Emotional intellect is
a key aspect to adhere to when managing situations and caring for patients
(Powell et al, 2015). Controlling emotions and self-awareness are both vital
components of emotional intellect (Powell et al, 2015). Doing so decreases the
risk of burnout and ensures that patients are receiving high quality care
(Powell et al, 2015). In addition, being aware of one’s emotions enables a
collaboration that is needed to meet the needs of individuals within the
complex and increasingly technical NHS system (Powell et al, 2015).
The qualities of a leader
The main traits of a
good leader were assessed by Yukl (2013). They consist of a high level of
energy, stress coping mechanisms, confidence, control, maturity, integrity, as
well as being a high achiever, with low needs for affiliation. Nursing leaders
need to be empowering, promote independence, encourage a critical and effective
work environment and remain positive (Jukes, 2013). They should enable fellow
healthcare professionals to build resilience, enabling them to make their own
decisions yet providing protection when needed (Jukes, 2013). In order to
achieve structural change for the provision of high-quality care, the following
should be adhered to: promoting inclusive team work, maintaining trust, seeking
contribution, using personal authenticity, valuing relationships, enabling
learning and challenging any issues that arise (Cleary et al, 2011). Patients
need support and care which cannot be carried out without effective leadership
(Cleary et al, 2011). If a nurse does not show effective leadership skills,
they often retreat towards more traditional methods of behavior (more
documentation and relying on medicine), instead of promoting patient-centered
care (Jukes, 2013). Furthermore, leaders need to support any professionals that
they are responsible for in following the nursing and midwifery code at all
times (Nursing and Midwifery Code, 2015: 18).
The qualities of a manager
Managers oversee a
certain area, supervising fellow staff and ensuring that patient care is
upheld, in addition to administrative aspects (Jukes, 2013). Concerns are
addressed through their specialized nursing experience, good communication and
the ability to take the lead (Jukes, 2013). Good communication is key when
assessing any risks, managing plans, delegating work and ensuring the effective
and safe provision of resources (Jukes, 2013). Delegating work is an integral
part of effectively leading, encouraging active learning, whilst freeing up
more time for aspects that cannot be delegated (Weir-Hughes, 2011). Delegation
is a necessity, especially when staff numbers reduce and pressures rise
(Griffin, 2016). Managers also demonstrate excellent leadership skills by
improving nurse confidence and upholding morale (Timmins, 2011). They need to
ensure that staff are communicating effectively, in order to provide high
quality, safe care (Timmins, 2011). This can be carried out by implementing an
open leadership style, listening to the nurses and involving the team when
making decision (Timmins, 2011). Gilmartin and D’Aunno (2007) outline how nurses prefer managers who are
emotionally intelligent, facilitate change and who actively participate.
Further stating that this leads to cohesion, a sense of empowerment and reduces
stress and burnout (Gilmartin and D’Aunno,
2007). Management and leadership can only be improved by adhering to the
following: ensuring a good set of qualities and knowledge, a supportive environment,
an adequate number of managers and ensuring rewards or acknowledgement for good
practice (World Health Organization, 2007).
can lead to the unsafe provision of care (Nicolson et al, 2011). This was portrayed
during the 1990s, in which nurse Beverly Allitt
murdered children by injecting them with insulin. She was not supervised and
the deaths were not challenged by management (Nicolson et al, 2011). More
recently, the investigation into the Airedale NHS trust found nurse Anne
Grigg-Booth to be providing dangerous care. Many patients died under her care,
which was noted as an abundance of failures in which dangerous actions were not
acknowledged by management (Nicolson et al, 2011). Within the Mid Staffordshire
Foundation Trust, a lack of leadership and supervision detrimentally impacted
upon the lives of many, with high mortality rates (Nicolson et al, 2011). The
Francis Report identified various issues such as, call bells not being
answered, patients lying in their own urine and left without water or food
(Francis, 2013). Saving money was a priority and management preferred to meet
targets than deal with individual needs and thus leadership was poor (Nicolson
et al, 2011). Ineffective management has not only led to unsafe care but cost
more than £16m in legal fees and implementation costs (Calkin, 2013).
leadership encourages nurses to provide a high level of care by making
influential changes (Cleary et al, 2011). It involves the following actions:
building trust with fellow healthcare professionals, showing integrity,
inspiring team members, offering intellectual inspiration, adhering to the
needs of each individual and providing support (Malloy and Penprase,
2010). With this leadership style, professionals provide clear aims and a
pathway for their work, prioritising mutual respect,
working together, gaining nurse autonomy and upholding staff morale (Cleary et
al, 2011). Doing so prevents burnout, improves job satisfaction and a sense of
commitment (Cleary et al, 2011). Transformational leadership can be contrasted
with the transactional style in which leaders focus upon meeting targets (it is
not creative, reflective and prevents emotional connection) (Cleary et al,
Support for the transformational leadership
A study was
implemented by Malloy and Penprase (2010) on 122
nurses in order to assess their supervisor’s leadership style. The following
leadership styles were analysed: transactional,
transformational, exceptional-active, exceptional-passive and laissez-faire
(Molloy and Penprase, 2010). The study concluded that
aspects of transformational leadership were connected with 17 out of 37 areas
within the working environment, as calculated by the Copenhagen Psychosocial
questionnaire (Molly and Penprase, 2010). Leaders
implementing the transactional style also made positive contributions, but
fewer than that of a transformational style (Molly and Penprase,
2010). In addition, the laissez-faire, exceptional-passive and
exceptional-active styles all negatively impacted the nursing environment
(Molly and Penprase, 2010). Corrigan et al (2002)
carried out a mental health study, consisting of 236 leaders who had
responsibility for 620 staff members. Leaders who noted themselves as high on
the transactional style, had staff outlining low transformational scores. In
comparison, leaders who noted high levels of inspirational and stimulatory
aspects were likely to have staff who felt that their style was transformative
(Corrigan et al, 2002). Lastly, staff members who stated that their leader has
a transformational style experienced less burnout, a better working environment
and support, adhering to conclusions by Malloy and Penprase
(2010). In a time of uncertainty, healthcare budget cuts, policy changes and
financial strain, transformational leadership is key (Cleary et al, 2011). It
encourages staff to treat patients with respect and dignity, promoting patient-centred care and upholding values (Cleary et al, 2011).
Many argue however, that there needs to be more evidence into whether
transformational leaderships enable better care, improved quality of life and
patient satisfaction (Holm and Severinsson, 2010).
NHS leadership review
published findings in order to analyze leadership within the NHS (Department of
Health, 2015). It noted three main areas of concern: a lack of vision, poor
management and leadership and the need for clear pathways in regards to NHS
management careers (Department of Health, 2015). The key recommendations
include: refreshing the NHS graduate scheme, the transfer of NHS leadership
Academy to Health Education England as those responsible for training and
introducing a minimum term on some senior management contracts. In addition,
managers should be supported and have their knowledge updated regularly in
order to prevent ‘skill fade’ (Department of Health, 2015: 53). The report
concluded that, ‘the NHS as a whole, lacks a clear, consistent, view of what
‘good’ or ‘best’ leadership looks like’ (Department of Health, 2015: 20). The
recommendations focus upon training, management, support, performance
management and bureaucracy (Department of Health, 2015).
To conclude, effective
leadership is necessary in order to provide a high level of safe care. It leads
to patient-centered care, excellent communication skills and high quality care.
Leaders need to communication well, have emotional intelligence, distribute
work and implement a transformational style. Whereas poor leadership can lead
to death or severe harm, as took place in the independent investigation into
the Airedale NHS trust. Ineffective leadership was also a main aspect of why
the detrimental acts of Anne Grigg-Booth went undetected by managers (Nicolson
et al, 2011). To emphasise, leadership is a key area
of the NHS and so it is vitally important to ensure that behaviours,
communication skills, qualities, skills, leadership styles and strategies are
focused upon to improve (West et al, 2015). Without doing so, the lives of many
will be affected.
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