Download this Paper Open PDF in Browser

Banking and Debt Crises in Europe: The Dangerous Liaisons?

30 Pages Posted: 6 Apr 2010  

Bertrand Candelon

University of Maastricht - Department of Economics

Franz C. Palm

University of Maastricht - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

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

Candelon, Bertrand and Palm, Franz C., Banking and Debt Crises in Europe: The Dangerous Liaisons? (March 2010). CESifo Working Paper Series No. 3001. Available at SSRN: https://ssrn.com/abstract=1582866

Bertrand Candelon (Contact Author)

University of Maastricht - Department of Economics ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

Franz C. Palm

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.cesifo.de

University of Maastricht - Department of Economics ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
+31-(0)43-3883833 (Phone)
+31-(0)43-3258535 (Fax)

Paper statistics

Downloads
595
Rank
36,386
Abstract Views
2,040