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Ramifications of Debt Restructuring on the Euro Area: The Example of Large European Economies' Exposure to Greece

Discussion Papers 1141, 21 S.

Ansgar Belke, Christian Dreger

2011

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Abstract

The Greek government budget situation plays a central role in the debt crisis in the euro area. The debt to GDP ratio is above 150 percent, while the deficit to GDP ratio exceeds 10 percent. To re-establish the Maastricht criteria, respectively, strong consolidation measures need to be implemented, with potential adverse effects on the Greek economy, and further credit requirements. Therefore, a debt conversion might become a reasonable alternative. The aim of this paper is to provide some simulation-based calculations on the expected fiscal costs for the governments in the large European countries Germany, France, Spain and Italy arising from different policy options - among them a potential second Greek rescue package. Under realistic conditions, a debt conversion may be the less costly strategy for Greece and the euro area partner states. A value-added of these calculations lies in a potential transfer to smaller euro area member countries.



JEL-Classification: F33;F34;H63
Keywords: Euro area debt crisis, debt conversation, Greece
Frei zugängliche Version: (econstor)
http://hdl.handle.net/10419/55304

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