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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
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?," 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?," Policy Contributions 567, Bruegel.
- 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.:
- Zsolt Darvas & Christophe Gouardo & Jean Pisani-Ferry & AndrÃ© Sapir, 2011. "A comprehensive approach to the euro-area crisis: Background calculations," Working Papers 499, Bruegel.
- Gelos, R. Gaston & Sahay, Ratna & Sandleris, Guido, 2011.
"Sovereign borrowing by developing countries: What determines market access?,"
Journal of International Economics,
Elsevier, vol. 83(2), pages 243-254, March.
- R. Gaston Gelos, Ratna Sahay and Guido Sandleris, 2008. "Sovereign Borrowing by Developing Countries: What Determines Market Access?," Business School Working Papers 2008-02, Universidad Torcuato Di Tella.
- Barry Eichengreen, 2007.
"The Breakup of the Euro Area,"
NBER Working Papers
13393, National Bureau of Economic Research, Inc.
- Guntram B. Wolff, 2011. "Changing of the guard - Challenges ahead for the new ECB president," Policy Contributions 600, Bruegel.
- Sylvia Gloggnitzer & Isabella Lindner, 2011. "Economic Governance Reform and Financial Stabilization in the EU and in the Eurosystem – Treaty-Based and Intergovernmental Decisions," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 4, pages 36â58.
- Zsolt Darvas, 2012. "The euro crisis: ten roots, but fewer solutions," Policy Contributions 755, Bruegel.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Balazs Varga).
If references are entirely missing, you can add them using this form.