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

Ansgar Belke and Christian Dreger

No 273, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

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 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.

Keywords: Euro area debt crisis; debt conversion; Greece (search for similar items in EconPapers)
JEL-codes: F33 F34 H63 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (7)

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Working Paper: Ramifications of Debt Restructuring on the Euro Area: The Example of Large European Economies' Exposure to Greece (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:273

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