Central bank swap line effectiveness during the euro area sovereign debt crisis

2020 ◽

Vol 31 (1) ◽

pp. 345-352

Author(s):

Michael Waibel

Keyword(s):

Central Bank ◽

Euro Area ◽

Sovereign Debt ◽

European Central Bank ◽

Debt Crisis ◽

Sovereign Debt Crisis ◽

Member States ◽

Asset Price Bubbles ◽

European Central ◽

Economic Policy Maker

Abstract This article assesses the legacy of Mario Draghi as president of the European Central Bank (ECB) from 2011 to 2019, with particular reference to the Greek’s sovereign debt crisis. Most macro-economic indicators improved over the course of Draghi’s tenure at the ECB, including inflation, budget deficits, yield spreads among euro-area borrowers and unemployment. Draghi played a decisive role in turning the tide on the crisis of confidence that afflicted the euro area and threatened the survival of Europe’s single currency in the wake of Greece’s sovereign debt crisis. Yet the ECB’s unconventional policies prompted sustained controversy and contributed to a low level of trust in the central bank among people in the euro-area member states. The focus of controversy has been on possible asset-price bubbles and ‘hidden’ transfers between euro-area member states. When and how to normalize its policies is a major challenge for the ECB, as it is for other major central banks that adapted similar policies in response to the global financial crisis.

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The Impact of the Sovereign Debt Crisis on Bank Lending Rates in the Euro Area

SSRN Electronic Journal ◽

10.2139/ssrn.2284804 ◽

2013 ◽

Cited By ~ 16

Author(s):

Stefano Neri

Keyword(s):

Euro Area ◽

Sovereign Debt ◽

Debt Crisis ◽

Bank Lending ◽

Sovereign Debt Crisis ◽

Lending Rates ◽

The Impact

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Eurobonds: Three Lessons from China’s “Debt Centralization/Decentralization” Experience

The Economists Voice ◽

10.1515/ev-2020-0020 ◽

2021 ◽

Vol 0 (0) ◽

Author(s):

Zhiyong An

Keyword(s):

Moral Hazard ◽

Euro Area ◽

Sovereign Debt ◽

Debt Crisis ◽

Budget Constraint ◽

Sovereign Debt Crisis ◽

The European Union ◽

Member States ◽

Institutional Mechanism ◽

Previous Series

Abstract Eurobonds, dubbed as Coronabonds in the context of the current coronavirus crisis, are being hotly debated among the euro area member states amid the COVID-19 pandemic. The debate is in many ways a retread of the euro area sovereign debt crisis of 2011–2012. As China’s “debt centralization/decentralization” experience is comparable with the introduction of Eurobonds in the European Union (EU) in terms of institutional mechanism design, we review our previous series of studies of China’s “debt centralization/decentralization” experience to shed some light on the Eurobonds debate. We obtain three key lessons. First, the introduction of Eurobonds in EU is likely to soften the budget constraint of the governments of the euro area member states. Second, it is also likely to strengthen the moral hazard incentives of the governments of the euro area member states to intentionally overstate their budget problems. Finally, the magnitudes of the moral hazard effects generated by the introduction of Eurobonds in EU are likely larger than their respective counterparts in China.

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