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The Public Debt Of Countries From Euro Zone. The Snowball Effect

Author

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  • Radulescu, Andrei

    (Senior Investment Analyst, SSIF Broker)

Abstract

Five years after the start of the worst financial and economic crisis since the end of the World War II the euro area countries are confronted with the persistence of the public debt crisis. The recent literature on macro-financial topics identifies the main factors that determined the launch of the sovereign debt crisis in Europe. One of the consequences of this crisis consists in the public debt effect. Several European countries pay an interest rate higher than the nominal GDP rate, leading to a snowball effect for the public debt. This short article reviews the main factors that determined the launch of the sovereign debt crisis and computes the public debt effect for the Euro Zone (12) member countries.

Suggested Citation

  • Radulescu, Andrei, 2012. "The Public Debt Of Countries From Euro Zone. The Snowball Effect," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 16(3), pages 95-103.
    • Handle: RePEc:vls:finstu:v:16:y:2012:i:3:p:95-103
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    References listed on IDEAS

    as
    1. von Hagen, Jürgen & Schuknecht, Ludger & Wolswijk, Guido, 2011. "Government bond risk premiums in the EU revisited: The impact of the financial crisis," European Journal of Political Economy, Elsevier, vol. 27(1), pages 36-43, March.
    2. Gerlach, Stefan & Schulz, Alexander & Wolff, Guntram B., 2010. "Banking and sovereign risk in the euro area," Discussion Paper Series 1: Economic Studies 2010,09, Deutsche Bundesbank.
    3. Luciana Barbosa & Sónia Costa, 2010. "Determinants of the sovereign bond yield spreads in the Euro Area in the context of the economic and financial crisis," Working Papers w201022, Banco de Portugal, Economics and Research Department.
    4. Ms. Edda Zoli & Ms. Silvia Sgherri, 2009. "Euro Area Sovereign Risk During the Crisis," IMF Working Papers 2009/222, International Monetary Fund.
    5. Salvador Barrios & Per Iversen & Magdalena Lewandowska & Ralph Setzer, 2009. "Determinants of intra-euro area government bond spreads during the financial crisis," European Economy - Economic Papers 2008 - 2015 388, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
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    More about this item

    Keywords

    public debt crisis; snowball effect; Euro Zone; interest rate spread;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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