Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/108231
Authors: 
Darvas, Zsolt
Year of Publication: 
2011
Series/Report no.: 
IEHAS Discussion Papers MT-DP - 2011/33
Abstract: 
There are two possible responses to the Greek debt crisis: 'Plan A', continued official lending, for as long as needed, with possible voluntary private sector involvement, and 'Plan B', coercive pre-emptive or post-default restructuring with significant face value reduction in privately-held debt. Both options have risks, but it is necessary to move to Plan B sooner or later. The impact on Greece could be mitigated by foreign bank ownership and proper liquidity support measures. The direct spillover impact on the rest of the euro area seems small. But there is the risk of contagion, which is a serious concern. There is a cautious case for delaying somewhat Plan B in order to prepare for it.
Subjects: 
debt restructuring
euro-area crisis
fiscal sustainability
financial interdependence
Lehman Brothers
JEL: 
F34
E60
H63
ISBN: 
978-615-5024-70-2
Document Type: 
Working Paper

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