Debt Restructuring in the Euro Area: a Necessary but Manageable Evil?

Zsolt Darvas

No 1104, Working Papers from Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest

Abstract: There are two possible responses to the Greek debt crisis: 'Plan A', continued official lending, for as long as needed, with possible voluntary private sector involvement, and 'Plan B', coercive pre-emptive or post-default restructuring with significant face value reduction in privately-held debt. Both options have risks, but it is necessary to move to Plan B sooner or later. The impact on Greece could be mitigated by foreign bank ownership and proper liquidity support measures. The direct spillover impact on the rest of the euro area seems small. But there is the risk of contagion, which is a serious concern. There is a cautious case for delaying somewhat Plan B in order to prepare for it.

Keywords: debt restructuring; euro-area crisis; fiscal sustainability; financial interdependence; Lehman Brothers (search for similar items in EconPapers)
JEL-codes: E60 F34 H63 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2011-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://web.uni-corvinus.hu/matkg/working_papers/wp_2011_4_darvas.pdf (application/pdf)

Related works:
Working Paper: Debt restructuring in the euro area- A necessary but manageable evil? (2011)
Working Paper: Debt restructuring in the euro area: a necessary but manageable evil? (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mkg:wpaper:1104

Access Statistics for this paper

More papers in Working Papers from Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest Contact information at EDIRC.
Bibliographic data for series maintained by Balazs Varga ( this e-mail address is bad, please contact ).