"If international markets take precedence over the democratic process, there is something wrong with the system." These might sound like the words of Greek prime minister George Papandreou, confronting the fury unleashed by global investors on Greek sovereign spreads since late 2009. However, they are actually the words of another George, one who has made his fortune betting against government policy and against European monetary union - George Soros.
His comments, in 2002, referred to the catastrophic market reaction when Luiz Inacio Lula da Silva took a decisive lead in the Brazilian presidential election campaign. Apparently, a Workers' Party was incapable of turning around a difficult fiscal situation.
Eight years later, as his time in office approaches an end, President Lula da Silva has instead been fêted by investors for helping to turn Brazil into an economic powerhouse with global influence, and one of the success stories of the financial crisis.
And if there is one key lesson of that crisis, it is not to unduly trust markets more than we trust governments.
Default option
Any entity defaults only when it is unwilling or unable to repay. There are protests against budget cuts across southern Europe and in Ireland. However, no government has even hinted that it would be willing to choose default - as happened in Argentina in 2002. Argentina also faced disaster because so much of its debt was denominated in foreign currencies at a time when the country's exports were falling. If the government could not earn tax dollars from export duties, it could not repay.
Eurozone governments pay their debts in the same currency in which they earn their revenues. And the very name 'sovereign' is a reminder that a government has unparalleled powers to raise revenue or cut spending as necessary.
There are billions of euros of infrastructure projects pending that could be postponed to reduce a government's borrowing requirements overnight - at least until markets have recovered a sense of perspective. In troubled eastern Europe, governments have routinely been known to run arrears on public sector wages in extremis.
None of these measures is popular, but in democratic countries this should give the speculators pause for thought rather than encouragement. Financial market players are out of favour with governments worldwide. The EU is already drafting new controls on hedge funds and some member governments argue they do not go far enough. Restrictions on short-selling bank stocks are only just being lifted and there are technical ways to cut speculation against sovereign debt - for example, by banning the practice of cash-settling credit default swaps (CDS), which has given investors free rein to buy CDS in far larger volumes than the total outstanding sovereign debt itself.
As John Maynard Keynes never quite said, governments can stay sovereign for longer than markets can stay irrational.
