A viable insolvency procedure for sovereigns (VIPS) in the euro area

Clemens Fuest, Friedrich Heinemann and Christoph Schröder

No 14-053, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: A mechanism to restructure the debt of an insolvent euro country is a missing element in the emerging institutional architecture of the euro area. The introduction of an insolvency procedure for sovereigns faces a dilemma: In the foreseeable future, its introduction would risk pushing Europe back into acute crisis. But the indefinite postponement of reform would impair the credibility of a future regime change. Against this background, this paper reviews arguments and existing blueprints for sovereign insolvency procedures in the euro area and develops a 'Viable Insolvency Procedure for Sovereigns' (VIPS). VIPS avoids any sudden measures which could destabilize the present fragile situation but carefully designs an irreversible transition towards the new regime. The VIPS proposal comprises two pillars: An insolvency procedure for the long run and a credible bridge towards that system.

Keywords: euro area debt crisis; sovereign insolvency procedure (search for similar items in EconPapers)
JEL-codes: F34 H12 H63 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-eec
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/100658/1/79435324X.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:14053

Access Statistics for this paper

More papers in ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().