Debt Restructuring in the Euro Area: a Necessary but Manageable Evil?
AbstractThere are two possible responses to the Greek debt crisis: 'Plan A', continued official lending, for as long as needed, with possible voluntary private sector involvement, and 'Plan B', coercive pre-emptive or post-default restructuring with significant face value reduction in privately-held debt. 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 Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest in its series Working Papers with number 1104.
Length: 39 pages
Date of creation: Jun 2011
Date of revision:
debt restructuring; euro-area crisis; fiscal sustainability; financial interdependence; Lehman Brothers;
Other versions of this item:
- Zsolt Darvas, 2011. "Debt restructuring in the euro area: A necessary but manageable evil?," Policy Contributions 567, Bruegel.
- 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.
- 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-2012-01-18 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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