Why fiscal sustainability matters

Willem Buiter 10 January 2014

a

A

Does fiscal sustainability matter only when there is a fiscal house on fire, as was the case with the Greek sovereign insolvency in 2011–12? Far from it.

a

A

Topics:  Financial markets Global crisis International finance Macroeconomic policy

Tags:  eurozone, sovereign debt, capital flows, financial crisis, credit booms, fiscal policy, emerging markets, global financial crisis, banking, banks, Eurozone crisis, Currency wars, fiscal sustainability, banking union, sovereign debt restructuring, balance-sheet recession

The ghost of Deauville

Ashoka Mody 07 January 2014

a

A

The aversion to debt restructuring in the Eurozone has been remarkable, even though public debt ratios in several countries are well above the IMF-identified critical debt overhang threshold of 100% of GDP (IMF 2012). By early 2010, some recognised the urgency of restructuring Greek public debt (Calomiris 2010). But the official position between late 2009 and early 2011 deemed even Greek debt to be sustainable. Beyond the particularities of Greece, general principles were invoked. In the words of Cottarelli et al.

a

A

Topics:  Financial markets International finance

Tags:  eurozone, sovereign debt, Eurozone crisis, sovereign debt restructuring, financial contagion, Deauville

Incentives for avoiding delayed sovereign defaults

Ugo Panizza 03 March 2013

a

A

The international financial architecture needs a structured mechanism for dealing with sovereign defaults. The main problem with the status quo is that countries tend to sub-optimally delay necessary defaults, leading to substantial loss of value for debtors and creditors alike. Opponents and supporters of a structured mechanism for dealing with sovereign insolvency agree on the fact that this is a difficult endeavour.

a

A

Topics:  Europe's nations and regions International finance

Tags:  lender of last resort, Eurozone crisis, sovereign debt restructuring

Sovereign default and the rules of engineering

Ugo Panizza 02 March 2013

a

A

The ongoing European crisis and the recent ruling (see, for example, Gelpern 2012) of the United States Court of Appeals for the Second Circuit in NML Capital Ltd. versus Republic of Argentina reignited the debate on sovereign debt restructuring. This post uses the rules of engineering to make the case for the creation of a structured mechanism for managing sovereign debt crises (for more details, see Panizza 2013).

a

A

Topics:  Europe's nations and regions International finance

Tags:  collective action clauses, CACs, sovereign debt restructuring

Events