to bailout expectations, which in turn resulted in soft budget constraints and over-borrowing. This paper investigates … their deficits – but only to pre Maastricht levels. In other words, the Euro led to soft budget constraints, and the PIIGS … exploited these soft budget constraints to some extent (but not excessively). From a policy perspective, our findings favor …

schemes. This paper explores whether such features of cooperative federations lead to subnational soft budget constraints … federation like Germany is susceptible to soft budget constraints. The results suggest that state borrowing in Germany exhibited … subnational governments' borrowing will exhibit vertical and horizontal strategic interactions if they operate under soft budget …