Resolving the European Debt Crisis

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William R. Cline, Guntram Wolff
Peterson Institute, 2012 - Debts, External - 305 pages
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What began as a relatively localized crisis in Greece in early 2010 soon escalated to envelop Ireland and Portugal. By the second half of 2011, the contagion had spread to the far larger economies of Italy and Spain. In mid-September the Peterson Institute and Bruegel hosted a conference designed to contribute to the formulation of policies that could help resolve the euro area debt crisis. This volume presents the conference papers; several are updated through end-2011. European experts examine the political context in Greece (Loukas Tsoukalis), Ireland (Alan Ahearne), Portugal (Pedro Lourtie), Spain (Guillermo de la Dehesa), Italy (Riccardo Perissich), Germany (Daniela Schwarzer), and France (Zaki Laidi). Lessons from past debt restructurings are then examined by Jeromin Zettelmeyer (economic) and Lee Buchheit (legal). The two editors separately consider the main current policy issues: debt sustainability by country, private sector involvement and contagion, alternative restructuring approaches, how to assemble a large emergency financing capacity, whether the European Central Bank (ECB) should be a lender of last resort, whether joint-liability "eurobonds" would be feasible and desirable, and the implications of a possible break-up of the euro area. The luncheon address by George Soros and a description (by Steven R. Weisman with Silvia B. Merler) of the policy simulation game played on the second day of the conference complete the volume. Involving market participants and experts representing the roles of euro area governments, the ECB, IMF, G-7, and credit rating agencies, the game led to a proposal for leveraging the capacity of the European Financial Stability Facility through arrangements with the ECB.
 

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Contents

Ch 1 Overview
1
I PoliticalEconomic Environments
17
II Lessons from Past Debt Crises
163
III Pros and Cons of Alternative Policy Options
195
IV Policy Simulation Game
263
About the Contributors
275
Index
281
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About the author (2012)

William R. Cline, senior fellow, has been associated with the Peterson Institute for International Economics since 1981 and holds a joint appointment at the Center for Global Development. He is the author of 22 books, including Global Warming and Agriculture (2007), The United States as a Debtor Nation (2005), Trade Policy and Global Poverty (2004), Trade and Income Distribution (1997), Predicting External Imbalances for the United States and Japan (1995), International Debt Reexamined (1995), The Economics of Global Warming (1992), and The Future of World Trade in Textiles and Apparel (2nd ed., 1990).

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