Edited by Giuseppe Eusepi and Richard E. Wagner
Chapter 6: On some recent proposals of public debt restructuring in the Eurozone
This chapter deals with the issue of sovereign debts in the Eurozone. After a brief discussion of the reasons for their reduction, the different strategies used in the past to this end are considered. It is argued that they are either not viable today or can assure only limited results. Thus, the policy of accumulating primary surpluses seems the only practicable one. However, the alternative of restructuring has been investigated with growing attention. Two distinct perspectives have been followed. On one side, a number of proposals deal with the issue of existing debt. There are reasons to doubt that they are substantially different from the policies currently followed. On the other side, several projects are aimed at establishing a permanent insolvency mechanism for sovereigns, with the purpose of making effective the no bail-out principle. The question is raised as to whether they are feasible in the absence of any element of fiscal union.
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