Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/100658
Authors: 
Fuest, Clemens
Heinemann, Friedrich
Schröder, Christoph
Year of Publication: 
2014
Series/Report no.: 
ZEW Discussion Papers 14-053
Abstract: 
A mechanism to restructure the debt of an insolvent euro country is a missing element in the emerging institutional architecture of the euro area. The introduction of an insolvency procedure for sovereigns faces a dilemma: In the foreseeable future, its introduction would risk pushing Europe back into acute crisis. But the indefinite postponement of reform would impair the credibility of a future regime change. Against this background, this paper reviews arguments and existing blueprints for sovereign insolvency procedures in the euro area and develops a 'Viable Insolvency Procedure for Sovereigns' (VIPS). VIPS avoids any sudden measures which could destabilize the present fragile situation but carefully designs an irreversible transition towards the new regime. The VIPS proposal comprises two pillars: An insolvency procedure for the long run and a credible bridge towards that system.
Subjects: 
euro area debt crisis
sovereign insolvency procedure
JEL: 
F34
H12
H63
Document Type: 
Working Paper

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