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Journal of Marcroeconomics
Volume 48,
June 2016,
Pages 305–326
Journal of Marcroeconomics
Volume 48,
June 2016,
Pages 305–326
Author: Daragh Clancy | Senior Economist at the European Stability Mechanism with P. Jacquinot and M. Lozej
Abstract:
Richard Portes, Professor of Economics at London Business School is Founder and President of the Centre for Economic Policy Research (CEPR), and Senior Editor and Co-Chairman of the Board of Economic Policy.
Andreja Lenarčič and Dirk Mevis presented, "Tackling sovereign risk in European banks," at the European Investment Bank.
This discussion paper collects the experiences of former EFSF/ESM programme countries in rebuilding investor trust and returning to normal market access.
Coordination by ESM with contributions from heads of Debt Management Offices of Ireland, Portugal, Spain, and Cyprus
Download PDF: Discussion Paper 2
This discussion paper collects the experiences of former EFSF/ESM programme countries in rebuilding investor trust and returning to normal market access.
Coordination by ESM with contributions from heads of Debt Management Offices of Ireland, Portugal, Spain, and Cyprus
In a world of increasingly integrated capital markets, the global financial crisis and subsequent European financial instability underscored the necessity of setting up credible financial backstops for crisis prevention and resolution. Countries that are under severe financial strain may be shut out of capital markets and need to seek immediate financing assistance, while others with sound domestic policies and fundamentals may also suffer from excessive capital outflows spurred by heightened financial market risk aversion or spillover from other countries.
The recent economic and financial crisis led many households and companies to default on bank loans. European banks carry this large stock of NPLs on their balance sheets – the single largest legacy of the past crisis. The NPLs lock banks’ potential lending capacity. During the euro area crisis, the stock of NPLs increased by more than 300% to €928 billion as of end-September 2015 from €292 billion as of end-December 2007.
Euro area Member States have taken several steps to ease the lending terms for Greece to support its ability to service its debt burden, principally through lower financing costs and longer maturities.