The aggravating turbulences in the market for euro government bonds have so far precluded any recovery from the debt crisis. The key problem is that structural reforms and consolidation measures have long impact lags and are not able to stop an acute self-fulfilling crisis of confidence. In the...

In this paper we test two theories of the determination of the government bond spreads in a monetary union. The first one is based on the efficient market theory. According to this theory, the surging spreads observed from 2010 to the middle of 2012 were the result of deteriorating fundamentals...

A mechanism to restructure the debt of an insolvent euro country is a missing element in the emerging institutional architecture of the euro area. The introduction of an insolvency procedure for sovereigns faces a dilemma: In the foreseeable future, its introduction would risk pushing Europe...