Saving the euro: self-fulfilling crisis and the ‘Draghi put’

Marcus Miller, Lei Zhang 26 June 2014

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In surveying eight centuries of financial folly, Reinhart and Rogoff (2009) observed that:

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Topics:  International finance Monetary policy

Tags:  ECB, eurozone, sovereign debt, financial crises, sovereign debt crisis, Outright Monetary Transactions, European sovereign debt crisis, self-fulfilling crises

An early-warning indicator for debt sustainability

Casper van Ewijk, Jasper Lukkezen, Hugo Rojas-Romagosa 28 November 2013

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Insight into the sustainability of public finances is critical to European policymakers and financial markets alike. It informs decisions concerning the need for reform and the determination of the appropriate risk premium on government debt. Furthermore, unsustainable public finances may cause significant spillovers, highlighting the need for international fiscal surveillance. Recent experiences in Europe underscore how hard it is to foresee sovereign debt crises, with regard to both occurrence and depth; assessment of public finances is no easy task.

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Topics:  EU institutions Global crisis

Tags:  eurozone, sovereign debt crisis

Revisiting sovereign bankruptcy

Lee C. Buchheit , Beatrice Weder di Mauro, Anna Gelpern, Mitu Gulati, Ugo Panizza, Jeromin Zettelmeyer 12 November 2013

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Sovereign-debt crises occur regularly and often violently. The recent debt crisis in Greece almost led to the collapse of the euro. Yet, there is no legally and politically recognised procedure for restructuring the debt of bankrupt sovereigns.

Procedures of this type have been periodically debated – most recently, about a decade ago – when IMF management proposed a global sovereign debt restructuring mechanism (Krueger, 2002). Yet, they have so far been rejected.

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Topics:  EU institutions Global economy

Tags:  eurozone, IMF, sovereign debt crisis

The first sovereign debt crisis in the EU

Jon Danielsson, Hermann Oskarsson 11 September 2012

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Today is not the first time Europe has suffered a sovereign-debt crisis. Twenty years ago another crisis happened, passing without notice except amongst those affected, i.e. the Faroe Islands. The islands accumulated too much sovereign debt, eventually getting hit by a crisis much larger in magnitude than even the worst in the ongoing European crisis. Little analysis has been published on the crisis, and almost none in English. We mostly rely on Gørtz et al. (1994) and Hansen and Joensen (2008).

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Topics:  International finance Politics and economics

Tags:  eurozone, sovereign debt crisis, Faroes

Is Italy going to make it?

Nicola Borri, Gianfranco di Vaio, Giuseppe Ragusa 04 February 2012

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Topics:  EU policies Macroeconomic policy

Tags:  Italy, Eurozone crisis, sovereign debt crisis

The Future of Banking – solving the current crisis while addressing long-term challenges

Thorsten Beck 25 October 2011

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Three years after the Lehman Brothers failure sent shockwaves through financial markets, banks are yet again in the centre of the storm.

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Topics:  EU institutions EU policies Europe's nations and regions Financial markets Macroeconomic policy Politics and economics Taxation

Tags:  banking, capital requirements, Eurozone crisis, sovereign debt crisis, financial risks, euro bonds, ring-fencing, financial transaction tax, prudential regulation

A deadline for solving a deadly Eurozone sovereign debt crisis

Guillermo de la Dehesa 20 October 2011

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Next Sunday the European Council meeting should, once for all, dispel all of investors’ concerns about the Eurozone crisis. If the Council is not able to achieve this, it will cross the final red line of patience, making it very unlikely to ever regain the confidence of investors. Sunday may be very soon and only a few days before the G20 meeting in Cannes, but it has been two years since the Greek debt crisis explosion – more than enough time to have solved the crisis.

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Topics:  EU policies

Tags:  Eurozone crisis, sovereign debt crisis

Welcome to phase 2 of the Eurozone (EZ) crisis

Richard Baldwin 05 September 2011

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IMF Chief Christine Lagarde made phase 2 official: "Developments this summer have indicated we are in a dangerous new phase" (Lagarde 2011).

  • Phase 1 was the Eurozone (EZ) periphery;
  • Phase 2 is the EZ core (Gros 2011).

It is now possible that more Eurozone nations will need bailouts and Europe will fall into a Lehman-size recession (Wyplosz 2011).

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Topics:  EU policies Europe's nations and regions

Tags:  Eurozone crisis, sovereign debt crisis, Bank default

How does sovereign risk affect bank funding conditions? What can policymakers do?

Fabio Panetta, Michael Davies 26 July 2011

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The financial crisis and the subsequent recession have caused a sharp deterioration in public finances across advanced countries, raising concerns about sovereign credit risk. Sovereign risk is already a major issue in the Eurozone, where three countries have received international assistance, and others have seen their credit ratings lowered during 2009-11 and/or their funding costs rise.

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Topics:  Global economy International finance

Tags:  Fiscal crisis, Eurozone crisis, sovereign debt crisis

A debt swap to save Greece and the euro

Avinash Persaud 18 May 2010

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There is a simple way to resolve the Greek problem that will strengthen the euro, not undermine it, will lead international tax payers to recover the $145 billion they have pledged, not lose it, and will not require ambitious institution building in Europe at a time when the electorate is euro-fatigued. The solution requires three critical ingredients. So far we have seen much of two of them: an onerous Greek stabilisation package and the commitment to a very substantial package of fiscal support to Greece by European countries and the IMF.

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Topics:  Financial markets

Tags:  Eurozone crisis, sovereign debt crisis, greek crisis, voluntary debt swaps

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