In January 1995, U.S. President Bill Clinton organized a bailout for Mexico that imposed penalty interest rates and … induced the Mexican government to reduce its debt, ending the debt crisis. Can the Troika (European Commission, European … Central Bank, and International Monetary Fund) organize similar bailouts for the troubled countries in the Eurozone? Our …

default and on the recent Eurozone debt crisis …). A sovereign default in this environment then results in a banking crisis. Critically, we show that permitting banks to …