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 Laïdi). 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.
Selected chapters and sections are provided for preview only.
William R. Cline and Guntram B. Wolff
I. Political-Economic Environments
2. Greece in the Euro Area: Odd Man Out, or Precursor of Things to Come
3. Political-Economic Context in Ireland
4. Understanding Portugal in the Context of the Euro Crisis
5. Italy and the Euro Crisis
6. Spain and the Euro Area Sovereign Debt Crisis
Guillermo de la Dehesa
7. France, the State, and Globalization
8. The Political Economy of Germany in the Sovereign Debt Crisis
II. Lessons from Past Debt Crises
9. How to Do a Sovereign Debt Restructuring in the Euro Area: Lessons from Emerging-Market Debt Crises
10. Sovereign Debt Restructuring: The Legal Context
III. Pros and Cons of Alternative Policy Options
11. Alternative Strategies for Resolving the European Debt Crisis
William R. Cline
12. The Euro Area Crisis: Policy Options Ahead
Guntram B. Wolff
13. Comments on Policy Strategies
Gertrude Tumpel-Gugerell and Rodrigo de Rato
14. Does the Euro Have a Future?
IV. Policy Simulation Game
15. The Simulation Exercise: A Real Time Economic and Political Stress Test
Steven R. Weisman with Silvia B. Merler
About the Contributors