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28 April 2010

Bruegel: Europe needs a framework for debt crises


Bruegel director Jean Pisani-Ferry and Senior Fellow André Sapir argue that a European debt restructuring mechanism - on the lines of a sovereign debt restructuring mechanism, a suggestion that came up in the context of the Argentinean crisis - could be a realistic option.

Though the words debt restructuring repeatedly come up during discussions on the Greek crisis, the priority remains to implement the EU-IMF stabilisation package that can foster domestic efforts in Greece. However, Bruegel director Jean Pisani-Ferry and Senior Fellow André Sapir warn that the European Union needs to stay ahead of the curve and prepare a debt resolution mechanism in the event that a eurozone member has to tackle unsustainable debt. The authors argue that a European debt restructuring mechanism - on the lines of a sovereign debt restructuring mechanism, a suggestion that came up in the context of the Argentinean crisis - could be a realistic option. Questions about institutional coordination in activating an EDRM could pose a challenge.


© Bruegel

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