From financial crash to debt crisis

Carmen M Reinhart interviewed by Romesh Vaitilingam, 9 Apr 2010

Carmen Reinhart of the University of Maryland talks to Romesh Vaitilingam about the sequencing of the cycle of debt build-ups – from private debt surges to banking crises to sovereign debt crises – and the four ‘deadly D’s’ that once again threaten many governments as a consequence of the current crisis – deficits, debt, downgrade and default. The interview was recorded at the Royal Economic Society’s annual conference at the University of Surrey in March 2010.

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Topics: Financial markets, Global crisis, Macroeconomic policy
Tags: banking crises, debt, sovereign debt

It takes more than two to tango: Cry, but not for Argentina, nor for the holdouts

Jeffrey Frankel, 22 July 2014

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US federal courts have ruled that Argentina is prohibited from making payments to fulfil 2005 and 2010 agreements with its creditors to restructure its debt, so long as it is not also paying the few creditors that have all along been holdouts from those agreements.

Topics: Development, Global governance
Tags: Argentina, sovereign debt, US

Banks, government bonds, and default: What do the data say?

Nicola Gennaioli, Alberto Martin, Stefano Rossi, 19 July 2014

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Recent events in Europe have illustrated how government defaults can jeopardise domestic bank stability. Growing concerns of public insolvency since 2010 caused great stress in the European banking sector, which was loaded with Euro-area debt (Andritzky 2012).

Topics: Financial markets
Tags: bank lending, banking, banks, bonds, credit, financial crises, risk-weighting, sovereign debt, sovereign default

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:

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

Privatisation and debt: Lessons from Greece’s fiasco

Paolo Manasse, 31 January 2014

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In the midst of the European debt crisis, it is tempting to think that high-debt countries could alleviate the recessionary impact of the budget-consolidation process by selling (poorly managed) assets and stakes in their state-owned enterprises (SOEs), and by using the proceeds to buy back their debts (Hope 2011).

Topics: Financial markets, International finance
Tags: debt, European sovereign debt crisis, Greece, privatisation, sovereign debt

Why hasn’t Japan’s massive government debt wreaked havoc (yet)?

Charles Yuji Horioka, Takaaki Nomoto, Akiko Terada-Hagiwara, 21 January 2014

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The potential sovereign debt crisis in Japan looks even grimmer than those in the Eurozone economies if one looks only at the gross general government debt-to-GDP ratio.

Topics: Financial markets, International finance
Tags: fiscal sustainability, sovereign debt

Why fiscal sustainability matters

Willem Buiter, 10 January 2014

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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.

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

The ghost of Deauville

Ashoka Mody, 7 January 2014

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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).

Topics: Financial markets, International finance
Tags: Deauville, eurozone, Eurozone crisis, financial contagion, sovereign debt, sovereign debt restructuring

Joint liability in international lending: A proposal for amending the Treaty of Lisbon

Kaushik Basu, Joseph Stiglitz, 2 January 2014

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The sovereign debt crisis exposed weaknesses in the Eurozone’s financial architecture that may not have been fully anticipated when the founding treaties of the Eurozone were drafted. Key among these weak spots are the provisions of the Treaty of Lisbon which regulate intergovernmental debt obligations and preclude direct financing of sovereigns by the ECB.

Topics: EU institutions, International finance
Tags: eurozone, Eurozone crisis, Lisbon Treaty, Maastricht Treaty, moral hazard, no-bailout clause, sovereign debt

Sovereign default and state-contingent debt

Martin Brooke, Rhys Mendes, Alex Pienkowski, Eric Santor, 12 December 2013

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For the better part of the past six decades sovereign default has been widely viewed as an emerging-market economy (EME) phenomenon. Recent events, however, have changed this perception. In April 2012 the Greek government restructured €200bn of its sovereign debt, imposing net present value (NPV) losses of 59-65% on its creditors (Zettelmeyer et al., 2013).

Topics: Financial markets
Tags: GDP-linked bonds, sovereign cocos, sovereign debt, state-contingent debt

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