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Modelling The Sovereign Debt Crisis In Europe

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  • Dawn Holland
  • Simon Kirby
  • Ali Orazgani

Abstract

This note examines the impact of rising bond yields in certain Euro Area countries on debt sustainability. It concludes that without the financial assistance of the bailout packages, government debt in Greece would clearly have been unsustainable, while Ireland and Portugal would have been extremely vulnerable. We also examine the case of vulnerable countries which have not received bailouts — Italy, Spain and Belgium. We conclude that while they can absorb some temporary rise, as has been seen in recent weeks, a significant further sustained rise — more than 100–200 basis points — would call their solvency into question in the absence of financial assistance.
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Suggested Citation

  • Dawn Holland & Simon Kirby & Ali Orazgani, 2011. "Modelling The Sovereign Debt Crisis In Europe," National Institute Economic Review, National Institute of Economic and Social Research, vol. 217(1), pages 37-45, July.
    • Handle: RePEc:sae:niesru:v:217:y:2011:i:1:p:f37-f45
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    Cited by:

    1. Dr Katerina Lisenkova & Iana Liadze & Dr Ian Hurst, 2014. "Overview of the NiGEM-S Model: Scottish version of the National Institute Global Econometric Model," National Institute of Economic and Social Research (NIESR) Discussion Papers 422, National Institute of Economic and Social Research.
    2. Tielens, J. & van Aarle, B. & Van Hove, J., 2014. "Effects of Eurobonds: A stochastic sovereign debt sustainability analysis for Portugal, Ireland and Greece," Journal of Macroeconomics, Elsevier, vol. 42(C), pages 156-173.
    3. Dr Katerina Lisenkova & Iana Liadze & Dr Ian Hurst, 2014. "Overview of the NiGEM-S Model: Scottish version of the National Institute Global Econometric Model," National Institute of Economic and Social Research (NIESR) Discussion Papers 422, National Institute of Economic and Social Research.
    4. Schwarzmüller, Tim & Gern, Klaus-Jürgen & Jannsen, Nils & Van Roye, Björn & Scheide, Joachim & Boysen-Hogrefe, Jens & Groll, Dominik, 2011. "Weltkonjunktur im Herbst 2011," Kiel Discussion Papers 494/495, Kiel Institute for the World Economy (IfW Kiel).
    5. Boysen-Hogrefe, Jens, 2011. "Zur Haushaltsbelastung durch Risikoaufschläge auf spanische und italienische Staatsanleihen," Kiel Insight 2011.18, Kiel Institute for the World Economy (IfW Kiel).

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