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Europe's OrphanThe Future of the Euro and the Politics of Debt$
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Martin Sandbu

Print publication date: 2017

Print ISBN-13: 9780691175942

Published to Princeton Scholarship Online: May 2018

DOI: 10.23943/princeton/9780691175942.001.0001

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Righting the Course: From Bail-Out to Bail-In

Righting the Course: From Bail-Out to Bail-In

(p.139) Six Righting the Course: From Bail-Out to Bail-In
Europe's Orphan

Martin Sandbu

Princeton University Press

This chapter details how the eurozone's leadership redeemed itself in 2012–13, though only very partially, by moving from an abhorrence of sovereign and bank debt restructuring to an embrace of both. As 2011 turned into 2012, economic reality increasingly intruded into eurozone policymakers' world view. As such, starting in the second half of 2011, Europe's policy errors were slowly, divisively, and incompletely righted. Within less than two years, the early taboo on debt write downs had given way to Europe's first sovereign restructuring in generations and to an agreement that failing banks should write down creditors' claims before receiving any government aid. On both the sovereign and banking sides, the eurozone was moving from bail-out to bail-in.

Keywords:   eurozone, sovereign debt, bank debt, eurozone policymakers, debt writedowns, sovereign restructuring

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