Posted by hkarner - 9. November 2015
Graciela Laura Kaminsky 08 November 2015, voxeu
The Eurozone crisis is still lingering. This column uses data from 100 years of sovereign defaults to portray a new take on the crisis. The findings indicate that crises in a financial centre have persistent adverse effects on the periphery. They lead to more economic losses than home-grown idiosyncratic crises. Successful restructuring of such crises would require substantially larger debt write downs than those following idiosyncratic crises.
The Eurozone crisis is still lingering. While in the last couple of months only Greece’s debt woes have been at the centre of public attention, vulnerabilities across countries in the Eurozone are not fading away. Europe is still mired in a long depression, and debt problems are still escalating. While it is true that Ireland, Portugal, and Spain managed to exit their bailouts and Cyprus has recently announced that it intends to do the same, their debt problems are still lingering with debt/GDP ratios at around 100% or more. But the list does not end with the bailout countries. We could add Belgium, France, and Italy to this list of debt-ridden countries. What is the scope of this crisis?
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