Saving Imbalances and the Euro Area Sovereign Debt Crisis

11 Pages Posted: 10 Sep 2011

See all articles by Matthew Higgins

Matthew Higgins

Federal Reserve Bank of New York

Thomas Klitgaard

Federal Reserve Bank of New York

Date Written: September 2011

Abstract

For several years prior to 2010, countries in the euro area periphery engaged in heavy borrowing from foreign private investors, allowing domestic spending to outpace incomes. Now these countries face debt crises reflecting a loss of investor confidence in the sustainability of their finances. The result has been an abrupt halt in private foreign lending to these economies. This study explains how the periphery countries became dependent on foreign borrowing and considers the challenges they face reigniting growth while adjusting to greatly reduced access to foreign capital.

Keywords: imbalances, EMU

JEL Classification: F15, F32, F34, F36

Suggested Citation

Higgins, Matthew and Klitgaard, Thomas, Saving Imbalances and the Euro Area Sovereign Debt Crisis (September 2011). Current Issues in Economics and Finance, Vol. 17, No. 5, 2011. Available at SSRN: https://ssrn.com/abstract=1925018 or http://dx.doi.org/10.2139/ssrn.1925018

Matthew Higgins (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Thomas Klitgaard

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

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