Comparative Analysis of Sovereign Debt between Eastern and Southern European Countries

This article studies budgetary positions and trends in sovereign debt levels in two groups of EU Member States during the global financial and economic crisis. We argue that current fiscal positions and trends in sovereign debt in the Baltic states and Bulgaria are above all due to the implemented exchange rate mechanism whereas in the southern European countries and Ireland it is the institutional framework of the eurozone that plays a key role for national budgetary policies and respectively debt trends. The existence of an insurance or guarantee fund in the eurozone makes the key difference between its hardly pegged exchange rates and Currency board and has led to the loosening of fiscal discipline especially in South Europe. The article is organized as follows: first, the theoretical framework of the study is presented; second, public finances and sovereign debt trends before the beginning of the global crisis are studied and third, budgetary positions and sovereign debt challenges during the crisis are analyzed.