Debt restructuring in the euro area: A necessary but manageable evil?
AbstractThere are two possible responses to the Greek debt crisis: â??Plan Aâ??, continued official lending, for as long as needed, with possible voluntary private sector involvement, and â??Plan Bâ??, coercive pre-emptive or post-default restructuring with significant face value reduction. Both options have risks, but it is necessary to move to Plan B sooner or later. The impact on Greece could be mitigated by foreign bank ownership and proper liquidity support measures. The direct spillover impact on the rest of the euro area seems small. But there is the risk of contagion, which is a serious concern. There is a cautious case for delaying somewhat Plan B in order to prepare for it.
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Bibliographic InfoPaper provided by Bruegel in its series Policy Contributions with number 567.
Date of creation: Jun 2011
Date of revision:
Other versions of this item:
- Zsolt Darvas, 2011. "Debt restructuring in the euro area: a necessary but manageable evil?," IEHAS Discussion Papers 1133, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
- Zsolt Darvas, 2011. "Debt Restructuring in the Euro Area: a Necessary but Manageable Evil?," Working Papers 1104, Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest.
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
- E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
- H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-07-02 (All new papers)
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