Charles Wyplosz, 04 November 2011

Greek Prime Minister Papandreou made a stand this week. Even though he was backed down, this column argues that he did the EZ a favour by providing an opportunity to change course. One way or another, a disorderly Greek default is in the cards with its attendant contagion. At that point a real solution is inevitable – one that requires EZ leaders and the ECB to play on the same side with credible rules for all.

Juan José Cruces, Christoph Trebesch, 13 October 2011

What are the financial costs of a sovereign default? This column presents new data on investor losses – haircuts – in all sovereign debt restructurings between 1970 and 2010. Countries imposing high haircuts take significantly longer to reaccess capital markets after the event and subsequently pay higher interest rates.

Marco Onado, 02 September 2011

Growing pessimism and a spread of contagion is still haunting the Eurozone. This column argues that if the crisis moves beyond Greece, Ireland, and Portugal, no capital injection can reassure markets about possible losses on a few big Eurozone countries. What is needed is a credible restructuring of the debt of peripheral countries to ring-fence the damage.

Guido Tabellini, 15 July 2011

The Eurozone crisis is tearing Europe apart. This column argues that Eurozone leaders must (i) agree to create European-level institutions to monitor national budget and banking policies and (ii) draw a line between solvent and insolvent Eurozone nations before the markets do it for them. It adds that we are now discovering that a loss of sovereignty became inevitable the day we decided to create the single currency.

Paolo Manasse, 05 February 2011

Recent press reports suggest that Greece and Ireland may be allowed to buy back some of their debt. This column provides an example to show that if the purpose of the restructuring is to reduce the burden of payments for the debtor and to have creditors share the losses, a unilateral partial default or a debt swap would be preferable to a buyback.

Beatrice Weder di Mauro, Jeromin Zettelmeyer, 26 November 2010

The bailout of the Irish government has turned up the heat on Europe’s leaders. This column argues that it is time for a serious debate over one possible solution: A European Sovereign Debt Restructuring Mechanism.

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