Lee Buchheit, 21 May 2020

There are two phases needed in the response to help developing countries during the Covid-9 pandemic, the first is the need to get money into the hands of these countries, the second is the need for a more durable debt restructuring. Although China has joined with the other G20 countries in calling for a debt standstill, whether it will participate as a member of a coordinated form of that restructuring is an as-yet unresolved issue. Lee Buchheit (University of Edinburgh Law School) was speaking at CEPR / LSE IGA / SPP webinar on: Born Out of Necessity: A Debt Standstill for COVID-19, 7 May 2020.

Patrick Bolton, 21 May 2020

Getting a debt relief organised without credit ratings downgrades is like making an omelette without breaking any eggs, says Patrick Bolton (Columbia Business School & CEPR). Even without a debt standstill, rating downgrades are to be expected, so they should not be a deciding factor in negotiations. Recorded during a CEPR / LSE IGA / SPP webinar on: Born Out of Necessity: A Debt Standstill for COVID-19, 7 May 2020

Vesa Vihriälä, 15 April 2020

The high level of public debt in the euro area and doubts over debt sustainability in some member states mean that the fiscal expansion necessary to counter the Covid crisis will be challenging. This column argues for debt relief by the ECB that would allow all member states to finance the necessary fiscal measures in a normal fashion. While effectively forgiving past debt would create expectations that the same could happen again in the future, this moral hazard should be weighed against what is likely to happen without such relief. 

Marco Di Maggio, Ankit Kalda, Vincent Yao, 07 September 2019

Rising student debt is considered one of the creeping threats of our time. This column examines the effect of student-debt relief on individual credit and labour market outcomes. Following debt relief, distressed borrowers reduce their indebtedness by 26% and are 11% less likely to default on other accounts. After the discharge, the borrowers’ geographical mobility and probability of changing jobs increase. Ultimately, their income increases by about $3,000 over a three-year period. 

Barry Eichengreen, Emilios Avgouleas, Miguel Poiares Maduro, Ugo Panizza, Richard Portes, Beatrice Weder di Mauro, Charles Wyplosz, Jeromin Zettelmeyer, 20 March 2018

Greece’s third economic programme has been relatively successful, but before it can return to private market financing, the country will require more official debt relief. CEPR Policy Insight No. 92 asks how much debt relief is required and how it should be delivered. 

Barry Eichengreen, Emilios Avgouleas, Miguel Poiares Maduro, Ugo Panizza, Richard Portes, Beatrice Weder di Mauro, Charles Wyplosz, Jeromin Zettelmeyer, 20 March 2018

Greece’s third economic programme has been relatively successful, but before it can return to private market financing, the country will require more official debt relief. This column introduces a new CEPR Policy Insight which asks how much debt relief is required and how it should be delivered. Any debt relief package for Greece that wishes to avoid shifting the burden of repayment several generations into the future will need to include some degree of face-value debt relief.

M. Ayhan Kose, Franziska Ohnsorge, Naotaka Sugawara, 12 February 2018

The availability of fiscal space has been at the centre of recent debates on the effective use of fiscal policy. This column introduces a new cross-country database of fiscal space indicators and applies it to the analysis of the evolution of fiscal space over the past quarter century and during oil price plunges. Fiscal space has weakened materially in many emerging and developing economies since the Global Crisis. Fiscal space tends to deteriorate in energy-exporting emerging and developing economies during oil price plunges but later improves, often because of procyclical fiscal tightening.

Paul De Grauwe, 13 May 2016

Greece may be about to get some debt relief, although there is still resistance to the idea. This column argues that the ECB has been providing other Eurozone countries with debt relief since early 2015 through its programme of quantitative easing. The reason given for excluding Greece from the QE programme – the ‘quality’ of its government bonds – can easily be overcome if the political will exists to do so. It is time to start treating a country struggling under the burden of immense debt in the same way as the other Eurozone countries are treated.

Andrea Consiglio, Stavros Zenios, 12 August 2015

Some experts view Greek debt as sustainable, while others claim it is not sustainable. This column argues that the distinction between tactical and strategic debt sustainability can explain this difference of opinions. Moreover, strategic debt sustainability analysis should account for tail risk. This approach shows that Greek debt is highly unsustainable, but sustainability can be restored with a nominal haircut of 50%, interest rate concessions of 70%, or a rescheduling of debt to a weighted average maturity of 20 years. Greece and its creditors should ‘bet on the future’ and embrace debt relief.

Andrea Presbitero, 19 November 2010

The global crisis and expansionary government reactions that followed revived the attention of policymakers and academics on the adverse effects of large public debt. This column examines the case of Heavily Indebted Poor Countries. It argues that a focus on the consequences of external debt is outdated as the share of domestic debt in total public debt in increased from 11% to 37% from 1991 to 2008. A new framework to deal with total public debt is now required to take into account domestic interest payments.

Andreas Freytag, Gernot Pehnelt, 11 December 2008

In a future phase of the crisis, the issue of sovereign debt relief is likely to arise. Such debt relief has historically been marked by political failure and short-term thinking, and not delivered promising results. Drawing on recent research, this column argues for tying debt relief to good governance goals is one way to improve the outcome.

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