IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

The Diversity of Debt Crises in Europe

  • Jerome L. Stein

The foreign debts of the European countries are at the core of the current crises. Generally, the crises are attributed to government budget deficits in excess of the values stated in the Stability and Growth Pact (SGP)/Maastricht treaty. Proposals for reform generally involve increasing the powers of the European Union to monitor fiscal policies of the national governments and increasing bank regulation. My article is concerned with the following issues. [Q1] How can one explain the inter country differences in the debt crisis in Europe? Is there a single explanation, cause? [Q2] Specifically, were the crises due to government budget deficits or to the private sector? The answer will determine what is the appropriate policy to prevent a recurrence. [Q3] The Stability and Growth Pact/Maastricht Treaty and the European Union focused upon rules concerning government debt ratios and deficit ratios. They ignored the problem of “excessive” debt ratios in the private sector that led to a crisis in the financial markets. Neither the markets nor the Central Banks anticipated the crises until it was too late. My basic questions are: What is an “excessive” private sector debt ratio that is likely to lead to a crisis? What are theoretically based, not empirical ad hoc, Early Warning Signals (EWS) of debt crises? The answers determine to a large extent how one should evaluate proposals for economic reform, to avert future crises?

(This abstract was borrowed from another version of this item.)

If 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.

File URL:
Download Restriction: no

Article provided by Cato Journal, Cato Institute in its journal Cato Journal.

Volume (Year): 31 (2011)
Issue (Month): 2 (Spring/Summer)
Pages: 199-215

in new window

Handle: RePEc:cto:journl:v:31:y:2011:i:2:p:199-215
Contact details of provider: Postal: 1000 Massachusetts Avenue, N.W., Washington D.C. 20001-5403
Phone: (202) 842-0200
Fax: (202) 842-3490
Web page:

More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. Stein, Jerome L., 2011. "The crisis, Fed, Quants and stochastic optimal control," Economic Modelling, Elsevier, vol. 28(1-2), pages 272-280, January.
  2. Stein, Jerome L., 2006. "Stochastic Optimal Control, International Finance, and Debt Crises," OUP Catalogue, Oxford University Press, number 9780199280575, July.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cto:journl:v:31:y:2011:i:2:p:199-215. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Emily Ekins)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.