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Heading into Trouble: A Comparison of the Latin American Crises and the Euro Area's Current Crisis

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  • Manuel Ramos-Francia
  • Ana María Aguilar-Argaez
  • Santiago Garcia-Verdu
  • Gabriel Cuadra

Abstract

We compare the experience of Latin American external debt crises, in particular the one in the 80s, with the current European one. We do so with the aim of shedding some light on the needed adjustment mechanisms. We argue for the need of much larger debt relief in Europe. To address the moral hazard problems that would arise, we propose providing such relief conditional on the reduction of both the fiscal and the current account deficits to zero as a commitment signal.

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  • Manuel Ramos-Francia & Ana María Aguilar-Argaez & Santiago Garcia-Verdu & Gabriel Cuadra, 2014. "Heading into Trouble: A Comparison of the Latin American Crises and the Euro Area's Current Crisis," Working Papers 2014-17, Banco de México.
    • Handle: RePEc:bdm:wpaper:2014-17
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    Cited by:

    1. Nina Dodig & Hansjorg Herr, 2014. "Previous financial crises leading to stagnation – selected case studies," Working papers wpaper24, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.

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    More about this item

    Keywords

    Sovereign Debt; Debt Crisis; Crisis Management.;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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