The political economy of euro area sovereign debt restructuring

Arbeitspapier

The establishment of a sovereign debt restructuring mechanism (SDRM) is one of the important issues in the academic debate on a viable constitution for the European Monetary Union (EMU). Yet the topic seems to be taboo in official reform contributions to the debate. Against this backdrop, the article identifies the SDRM interests of key players, including the European Commission, the European Parliament, the European Central Bank and national governments. The empirical section takes advantage of the recently established EMU Positions Database. The findings confirm political economy expectations: Low-debt countries support an EMU constitution that includes an insolvency procedure whereas a coalition of high-debt countries and European institutions oppose it. The analysis points towards a possible political-economic equilibrium for coping with sovereign insolvencies: an institutional set-up without a SDRM and with hidden transfers. Recent European fiscal innovatios in response to the Covid-19 solvency shock confirm this prediction.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ZEW Discussion Papers ; No. 21-004

Classification and Topics

• Classification: Wirtschaft ; National Debt; Debt Management; Sovereign Debt ; International Fiscal Issues; International Public Goods ; International Agreements and Observance; International Organizations
• Subject: sovereign debt restructuring mechanism ; banking regulation ; EMU reform ; fiscal union

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Heinemann, Friedrich
• Event: Veröffentlichung
• (who): ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
• (where): Mannheim
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/229143
• Last update: 10.03.2025, 11:42 AM CET