The Maastricht Treaty and the Madrid Council decision severely restrict the choice of the euro conversion rates. In practical terms the authorities can only select the Ecu rates prevailing in the market the day before conversion. The market will lack a fixed point, however, so that infinite...

In this paper we analyse the prospects of a mini currency union in Europe. We argue that the Maastricht strategy will create a situation in which the countries excluded from the EMU will use their negative voting power to bar the entry of a number of core countries into the union. The countries...

This paper analyses several issues. First, it describes the main features of ERM II and compares them with those of ERM I as it evolved during the 1980s and 1990s. Second, it analyses whether, and under what conditions, ERM II will be more successful than its predecessor in avoiding disruptive...

This paper analyses several procedures for fixing conversion rates at the start of EMU. One consists of announcing a fixed conversion rate; a second (proposed by Lalmfalussy) would announce that the conversion rate will be an average of past market exchange rates; and a third involves announcing...

This paper analyses the constraints on the choice of the conversion rates resulting from the fact that the external value of the Ecu cannot be changed at the start of the third stage of EMU and that one Ecu must be converted into one Euro. These constraints force the authorities to accept the...

The ‘Stability Pact’ agreed at the Dublin Summit in December 1996 and concluded at the Amsterdam European Council in June 1997 prescribes sanctions for countries that breach the Maastricht deficit ceiling in stage three of European Monetary Union. This paper explores possible motivations for...

Contingent sovereign debt has the potential to create important welfare gains--but actual issuance is rare. Using hand-collected archival data, we examine the first known case of large-scale issuance of contingent sovereign debt in history. Philip II of Spain entered into hundreds of contracts...

We distinguish two attitudes towards debt. The attitude of prudent borrowers, which attempt to stabilize their debts to low levels, even in the event of a bad shock, and what we call, after Krugman, "Panglossian" borrowers, which only focus on the best of their growth prospects, and rationally...

Within the next few months, the Greek government, is supposed to persuade private creditors holding about EUR 200bn in its bonds to voluntarily exchange their existing bonds for new bonds that pay roughly 50 percent less. This may work with large creditors whose failure to participate in a debt...

We develop a sovereign debt model with official and private creditors where default risk depends on both the level and the composition of liabilities. Higher exposure to official lenders improves incentives to repay but carries extra costs, such as reduced ex-post flexibility. The model implies...