The Eurozone Debt Crisis -- The Options Now

11 Pages Posted: 8 Oct 2012

See all articles by Lee C. Buchheit

Lee C. Buchheit

Center for Contract and Economic Organization

Mitu Gulati

University of Virginia School of Law

Date Written: October 8, 2012

Abstract

The Eurozone debt crisis is entering its third year. The original objective of the official sector’s response to the crisis -- containment -- has failed. All of the countries of peripheral Europe are now in play; three of them (Greece, Ireland and Portugal) operate under full official sector bailout programs.

The prospect of the crisis engulfing the larger peripheral countries, Spain and Italy, has sparked a new round of official sector containment measures. These will involve active intervention by official sector players such as the European Central Bank in order to preserve market access for the affected countries.

This paper surveys the options now facing the sovereign debtors and their official sector sponsors. It concludes that there are no painless or riskless options. In the end, the question may come down to this -- to what extent will the official sector sponsors of peripheral Europe be prepared to take on their own shoulders (and off of the shoulders of private sector lenders) a significant portion of the debt stocks of these countries during this period of fiscal adjustment?

Suggested Citation

Buchheit, Lee C. and Gulati, Mitu, The Eurozone Debt Crisis -- The Options Now (October 8, 2012). Available at SSRN: https://ssrn.com/abstract=2158850 or http://dx.doi.org/10.2139/ssrn.2158850

Lee C. Buchheit (Contact Author)

Center for Contract and Economic Organization ( email )

New York, NY

Mitu Gulati

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

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