A New Start for the Eurozone: Dealing with Debt

Giancarlo Corsetti, Lars Feld, Philip Lane, Lucrezia Reichlin, Hélène Rey, Dimitri Vayanos, Beatrice Weder di Mauro 15 April 2015

This report, the first in the Monitoring the Eurozone series, addresses the measures Eurozone countries need to take to guard against returning financial instability that could threaten a sustainable recovery. The authors consider stock operations, lending structures and regulatory changes in protecting sovereign debt on a national and Europe-wide level.

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Table of Contents

About the Authors   
Acknowledgements   
Foreword  

Executive Summary  

Introduction 

1.    With high debt, the Eurozone remains vulnerable   

2.    Dealing with the legacy sovereign debt   

3.    Reforming the crisis lending framework    

4.    Diversification of sovereign risk and a safe asset    

Conclusion    

Discussion    

References    
Appendix A: Calibration of national debt buyback from seigniorage   
Appendix B: Calculation of the haircut for GDP bonds   

 

Giancarlo Corsetti

Pierre Werner Chair, European University Institute

Lars Feld

Director, Walter Eucken Institute; Professor of Economic Policy, University of Freiburg

Philip Lane

Governor, Central Bank of Ireland; Whately Professor of Political Economy, Trinity College Dublin (on leave); CEPR Research Fellow

Lucrezia Reichlin

Professor of Economics, London Business School; CEPR Research Fellow and trustee; IFRS Foundation trustee (chair steering committee sustainability reporting); Fellow of the British Academy; Fellow of the Econometric Society

Hélène Rey

Lord Bagri Professor of Economics, London Business School and CEPR Vice President and Research Fellow

Dimitri Vayanos

Professor of Finance and Director, Paul Woolley Centre for the Study of Capital Market Dysfunctionality, LSE

Beatrice Weder di Mauro

Professor of International Economics, Graduate Institute of Geneva; Distinguished Fellow, INSEAD Emerging Markets Institute, Singapore; President, CEPR

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