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Talking One's Way Out Of A Debt Crisis, Lee C. Buchheit, G. Mitu Gulati
Talking One's Way Out Of A Debt Crisis, Lee C. Buchheit, G. Mitu Gulati
Faculty Scholarship
The policy of Euro-area officialdom in the period 2010-2011 was to avoid, at all costs, a default and restructuring of the sovereign debt of a member of the monetary union. This policy was motivated principally, but not exclusively, by a fear that the international capital markets, if forcibly reminded of the precarious position of overindebted, growth-challenged members of a monetary union, might recoil generally from lending to European sovereigns. In short, they feared contagion.
The only alternative to permitting a debt restructuring, of course, was an official sector bailout. The afflicted countries -- Greece (until 2012), Portugal, Ireland and Cyprus …