Banking and Debt Crises in Europe: The Dangerous Liaisons?
30 Pages Posted: 6 Apr 2010
Date Written: March 2010
Abstract
The potential mutation of the Sub-Prime banking crisis into a sovereign debt one in Euro area countries is investigated. After reviewing the criteria used to measure the debt vulnerability, the balance sheet approach (BSA) is presented in order to illustrate the potential connections between these two types of crises. A graphical analysis yields evidence that at the end 2009 the probability of observing a Euro area country defaulting is less likely than six month before. Nevertheless, the serious threats, which concern Greece and Ireland, do not permit us to exclude the occurrence of a contagious, or self-fulfilling, sovereign debt or currency crises in Euro area in the future.
Keywords: banking crisis, sovereign debt crisis, European Union
JEL Classification: E32, F36
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
By Carmen Reinhart, Kenneth Rogoff, ...
-
International Institutions for Reducing Global Financial Instability
-
By Jonathan Eaton and Raquel Fernández
-
One Reason Countries Pay Their Debts: Renegotiation and International Trade
-
One Reason Countries Pay Their Debts: Renegotiation and International Trade
-
One Reason Countries Pay Their Debts: Renegotiation and International Trade
-
Can Output Losses Following International Financial Crises Be Avoided?
-
Defaultable Debt, Interest Rates and the Current Account
By Mark Aguiar and Gita Gopinath
-
Defaultable Debt, Interest Rates, and the Current Account
By Mark Aguiar and Gita Gopinath
-
Have Commercial Banks Ignored History?
By Sule Ozler