IDEAS home Printed from https://ideas.repec.org/p/diw/diwwpp/dp1141.html
   My bibliography  Save this paper

Ramifications of Debt Restructuring on the Euro Area: The Example of Large European Economies' Exposure to Greece

Author

Listed:
  • Ansgar Belke
  • Christian Dreger

Abstract

The Greek government budget situation plays a central role in the debt crisis in the euro area. The debt to GDP ratio is above 150 percent, while the deficit to GDP ratio exceeds 10 percent. To re-establish the Maastricht criteria, respectively, strong consolidation measures need to be implemented, with potential adverse effects on the Greek economy, and further credit requirements. Therefore, a debt conversion might become a reasonable alternative. The aim of this paper is to provide some simulation-based calculations on the expected fiscal costs for the governments in the large European countries Germany, France, Spain and Italy arising from different policy options - among them a potential second Greek rescue package. Under realistic conditions, a debt conversion may be the less costly strategy for Greece and the euro area partner states. A value-added of these calculations lies in a potential transfer to smaller euro area member countries.

Suggested Citation

  • Ansgar Belke & Christian Dreger, 2011. "Ramifications of Debt Restructuring on the Euro Area: The Example of Large European Economies' Exposure to Greece," Discussion Papers of DIW Berlin 1141, DIW Berlin, German Institute for Economic Research.
  • Handle: RePEc:diw:diwwpp:dp1141
    as

    Download full text from publisher

    File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.376445.de/dp1141.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    2. Eduardo Borensztein & Ugo Panizza, 2009. "The Costs of Sovereign Default," IMF Staff Papers, Palgrave Macmillan, vol. 56(4), pages 683-741, November.
    3. Hans-Werner Sinn, 2011. "Target-Salden, Außenhandel und Geldschöpfung," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 64(09), pages 23-25, May.
    4. Bulow, Jeremy & Rogoff, Kenneth, 1989. "Sovereign Debt: Is to Forgive to Forget?," American Economic Review, American Economic Association, vol. 79(1), pages 43-50, March.
    5. Georgios P. Kouretas & Prodromos Vlamis, 2010. "The Greek Crisis: Causes and Implications," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 57(4), pages 391-404, December.
    6. Mayer, Thomas & Gros, Daniel, 2011. "Debt reduction without default?," CEPS Papers 4150, Centre for European Policy Studies.
    7. Juan J. Cruces & Christoph Trebesch, 2013. "Sovereign Defaults: The Price of Haircuts," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(3), pages 85-117, July.
    8. Jeffrey D. Sachs, 1989. "Developing Country Debt and Economic Performance, Volume 1: The International Financial System," NBER Books, National Bureau of Economic Research, Inc, number sach89-1, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Waltraud Schelkle, 2012. "European Fiscal Union: From Monetary Back Door to Parliamentary Main Entrance," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(1), pages 28-34, April.
    2. Ansgar Belke & Florian Verheyen, 2012. "Doomsday for the Euro Area: Causes, Variants and Consequences of Breakup," International Journal of Financial Studies, MDPI, Open Access Journal, vol. 1(1), pages 1-15, July.
    3. Daly, Hounaida & Smida, Mounir, 2013. "Interaction entre politique monétaire et politique budgétaire:Cas de la Grèce
      [Fiscal and Monetary Policy Interactions : The Greece Case]
      ," MPRA Paper 45931, University Library of Munich, Germany.
    4. Daly, Hounaida & Smida, Mounir, 2013. "La coordination des politiques monétaire et budgétaire: Aperçu théorique
      [Coordination of monetary and fiscal policies: Theoretical Overview]
      ," MPRA Paper 48020, University Library of Munich, Germany.
    5. Daly, Hounaida & Smida, Mounir, 2014. "Fiscal Theory of Price Level," MPRA Paper 60142, University Library of Munich, Germany.

    More about this item

    Keywords

    Euro area debt crisis; debt conversation; Greece;

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:diw:diwwpp:dp1141. 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: (Bibliothek). General contact details of provider: http://edirc.repec.org/data/diwbede.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.