The Sovereign Debt Crisis in Europe, Save Banks Not States
AbstractThe European central bank is a bank of banks but not a bank of states. This reduces the capabilities of member states to finance deficits. The role of the central bank to cope with the debt crises is institutionally more limited than in most other Western countries. The European Stability Mechanism has not enough financial power to bail out all distressed countries in the Eurozone. Eurobonds could increase lending capacities but would require a change of the European treaty, which is not in sight. They violate the no bail out clause of Art.125 of the Treaty on the Functioning of the European Union. The policy option is therefore debt restructuring of distressed countries and a bailout of financial institutions to avoid conflagration. This option would also shift some of the burden to creditors outside the Eurozone rather than to shift all risk on the people in solvent countries within the Eurozone.
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Bibliographic InfoArticle provided by Cattaneo University (LIUC) in its journal The European Journal of Comparative Economics.
Volume (Year): 9 (2012)
Issue (Month): 2 (August)
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More information through EDIRC
Euro; European debt crisis; European Central Bank; European Stability Mechanism; Debt restructuring; Sovereign insolvency; no bail out clause; Eurobonds;
Find related papers by JEL classification:
- G01 - Financial Economics - - General - - - Financial Crises
- K33 - Law and Economics - - Other Substantive Areas of Law - - - International Law
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- Buti, M. & Eijffinger, S.C.W. & Franco, D., 2003.
"Revisiting the stability and growth pact: Grand design or internal adjustment?,"
Open Access publications from Tilburg University
urn:nbn:nl:ui:12-152958, Tilburg University.
- Buti, Marco & Eijffinger, Sylvester C W & Franco, Daniele, 2003. "Revisiting the Stability and Growth Pact: Grand Design or Internal Adjustment?," CEPR Discussion Papers 3692, C.E.P.R. Discussion Papers.
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- Buti, M. & Eijffinger, S.C.W. & Franco, D., 2003. "Revisiting the Stability and Growth Pact: Grand Design or Internal Adjustment?," Open Access publications from Tilburg University urn:nbn:nl:ui:12-176184, Tilburg University.
- Jakob de Haan & Helge Berger & David-Jan Jansen, 2004. "Why has the Stability and Growth Pact Failed?," International Finance, Wiley Blackwell, vol. 7(2), pages 235-260, 07.
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