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A modem Dionysus' tale: new evidence on the Greek debt crisis and the related costs

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  • Aurore Burietz

    (CRIISEA - Centre de Recherche sur les Institutions, l'Industrie et les Systèmes Économiques d'Amiens - UR UPJV 3908 - UPJV - Université de Picardie Jules Verne)

  • Loredana Ureche-Rangau

    (CRIISEA - Centre de Recherche sur les Institutions, l'Industrie et les Systèmes Économiques d'Amiens - UR UPJV 3908 - UPJV - Université de Picardie Jules Verne)

Abstract
In March 2012 Greece pressured its private creditors into agreeing a 53% write-off of its privately-held debt, amounting to 100 billion. Using a game theory approach, we determine whether debt reduction was optimal in reducing the probability of default. We estimate the costs associated with the reduction as well as the potential risks and costs of contagion within the eurozone, especially for large European economies such as Italy and Spain. We show evidence that the Greek sovereign debt crisis could not be handled in the same way as previous experiences. Greece's sovereign debt crisis is unique insofar as the country belongs to a monetary union that has failed to reach economic convergence among its members. This creates significant spillover risk for the other eurozone economies, especially regarding the potential costs of another credit event.

Suggested Citation

  • Aurore Burietz & Loredana Ureche-Rangau, 2016. "A modem Dionysus' tale: new evidence on the Greek debt crisis and the related costs," Post-Print hal-03688875, HAL.
    • Handle: RePEc:hal:journl:hal-03688875
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    1. Lumengo Bonga-Bonga & Mathias mandla Manguzvane, 2020. "Assessing the extent of contagion of sovereign credit risk among BRICS countries," Economics Bulletin, AccessEcon, vol. 40(2), pages 1017-1032.

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    More about this item

    JEL classification:

    • F3 - International Economics - - International Finance
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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