Posted by hkarner - 22. Juli 2016
Creditor participation clauses: Making orderly sovereign debt restructuring feasible in the Eurozone
Jochen Andritzky, Lars P Feld, Christoph M Schmidt, Isabel Schnabel, Volker Wieland 21 July 2016, voxeu
Secretary General, German Council of Economic Experts
Director, Walter Eucken Institute; and Professor of Economic Policy, University of Freiburg
President, RWI Essen and CEPR Research Fellow
Professor of Financial Economics, University of Bonn; Member of the German Council of Economic Experts; CEPR Research Fellow
Managing Director of the Institute for Monetary and Financial Stability (IMFS) and holder of the Endowed Chair of Monetary Economics, Goethe University Frankfur
To make the no-bailout clause credible and to enhance the effectiveness of crisis assistance, private creditors should contribute to crisis resolution in the Eurozone. This column proposes a mechanism to allow for orderly restructuring of sovereign debt as part of ESM programmes. If debt exceeds certain thresholds, the mechanism triggers an immediate maturity extension. In a second stage, a deeper debt restructuring could follow, depending on the solvency of a country. The mechanism could be easily implemented by amending ESM guidelines.
The fiscal rules in the Eurozone are designed to constrain fiscal policy so that sufficient buffers exist for countries to weather shocks. However, incentives to obey the rules have been low, due to weak enforcement. This means a reccurrence of sovereign debt crises still cannot be excluded from the realm of possibilities. As a result, it is advisable to prepare for such unfortunate situations in advance.
Den Rest des Beitrags lesen »
Posted in Artikel | Verschlagwortet mit: Andritzky, Bailout, Debt, ESM, Euro, Feld, Schmidt, Schnabel, voxeu, Wieland | Leave a Comment »