Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/229143
Authors: 
Heinemann, Friedrich
Year of Publication: 
2021
Series/Report no.: 
ZEW Discussion Papers No. 21-004
Abstract: 
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.
Subjects: 
sovereign debt restructuring mechanism
banking regulation
EMU reform
fiscal union
JEL: 
H63
H87
F53
Document Type: 
Working Paper

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