How the sovereign debt crisis changed the euro zone

The idea that the Euro zone sovereign debt crisis was caused by structural weaknesses degenerating into fundamental macroeconomic imbalances in the peripheral countries prevails among international institutions such as the IMF, the ECB, and the European Commission. On the contrary, some economists believe that this crisis is the consequence of major deficiencies in the architecture of economic policy making in the Euro zone that did not allow a proper response to a global systemic crisis of the financial markets that started in the United States. The objective of this paper is to provide a better understanding of the public debt dynamics in the EU, differentiating the case of Euro zone peripheral countries. We used quarterly data from 2000 to 2011 to estimate a small-scale model that takes into account the interactions between key variables. Our results do not support entirely the official view. We conclude that the cause of the adverse debt dynamics unravelling after 2007 was a sharp GDP contraction, coupled with a substantial increase in the interest cost of debt finance due to higher self-fulfilling solvency risks perceived by creditors, interacting with a higher sensitiveness of Euro zone peripheral countries to fundamentals.

Download Full-text

Sovereign debt crisis of the Eurozone countries

Oeconomia Copernicana ◽

10.12775/oec.2016.021 ◽

2016 ◽

Vol 7 (3) ◽

pp. 357 ◽

Cited By ~ 5

Author(s):

Sławomir Miklaszewicz

Keyword(s):

Euro Area ◽

Sovereign Debt ◽

Final Section ◽

Debt Crisis ◽

Sovereign Debt Crisis ◽

Negative Consequences ◽

The Public ◽

Euro Zone ◽

European Central ◽

Coordination Process

The aim of the publication is to examine the fiscal position of the euro area countries and fiscal policy architecture in Europe after the outbreak of the financial and economic crisis started in 2008. The first part of the publication consists of the analyses of the budgetary situation of euro area countries and complications with the increasing costs of servicing the public debt in the European market affected by the financial liquidity crisis. In the second section the most important changes in the framework of budgetary policies coordination process in the euro zone are presented. The final section describes the role and activities of the European Central Bank in minimising the negative consequences of the debt crisis in the euro zone.

Download Full-text

The Euro zone peripheral countries’ sovereign debt crisis: Also a case of non-mature democracies?

Panoeconomicus ◽

10.2298/pan1303291f ◽

2013 ◽

Vol 60 (3) ◽

pp. 291-310 ◽

Cited By ~ 2

Author(s):

Abel Fernandes ◽

Paulo Mota

Keyword(s):

Sovereign Debt ◽

Debt Crisis ◽

The Other ◽

Sovereign Debt Crisis ◽

Member States ◽

Euro Zone ◽

The One ◽

The Relationship ◽

Political Variables ◽

Specific Contribution

The euro zone peripheral countries face a profound sovereign debt crisis threatening the very existence of the euro as we know it. Therefore, the study of the various factors contributing to this crisis is of the utmost importance. Given the set of the twelve initial member States, the euro zone peripheral countries (Portugal, Greece, and Spain) have in common the fact that they are recent democracies. Independently from other valid approaches to this question, the specific contribution of this paper is to focus on the role played by institutional and political variables in the behavior of fiscal variables. We show that the behavior of these variables is indeed statistically different from the one observed for the other euro zone countries, which are mature democracies. These outcomes are also in line with what that literature expects from the relationship between non-mature democracies and the incidence of election year budget cycles.

Download Full-text

European Economies Stability Faced With Potential Outburst of Sovereign Debt Crisis. An Empirical Study Using Neural Network

INTERNATIONAL JOURNAL OF COMPUTERS & TECHNOLOGY ◽

10.24297/ijct.v12i2.3318 ◽

2013 ◽

Vol 12 (2) ◽

pp. 3255-3260

Author(s):

Stelian Stancu ◽

Alexandra Maria Constantin

Keyword(s):

Neural Network ◽

Sovereign Debt ◽

Debt Crisis ◽

Banking System ◽

Sovereign Debt Crisis ◽

European Level ◽

Continuous Growth ◽

Economic Context ◽

European Economies ◽

The Impact

Instilment, on a European level, of a state incompatible with the state of stability on a macroeconomic level and in the financial-banking system lead to continuous growth of vulnerability of European economies, situated at the verge of an outburst of sovereign debt crises. In this context, the current papers main objective is to produce a study regarding the vulnerability of European economies faced with potential outburst of sovereign debt crisis, which implies quantitative analysis of the impact of sovereign debt on the sensitivity of the European Unions economies. The paper also entails the following specific objectives: completing an introduction in the current European economic context, conceptualization of the notion of â€œsovereign debt crisis, presenting the methodology and obtained empirical results, as well as exposition of the conclusions.

Download Full-text