Does the euro area need a sovereign insolvency mechanism?

The sovereign debt crisis highlighted weaknesses in the institutional framework of the euro area. The EU found itself scrabbling to take decisions and find a balance between flexibility and consistency in the application of rules. In the end, despite the no-bailout clause, the EU strove to avoid a default or meaningful restructuring of any eurozone state’s debt. The search for a long-term solution continues, with proposals ranging from full fiscal union to the ultimate threat of expulsion for euro area countries who find themselves cut off from the markets. The German Council of Economic Experts call for a credible no-bailout clause coupled with more effective crisis assistance. At this event, Lars Feld will argue for the introduction of a consistent institutional and legal framework to regulate sovereign debt restructuring in the eurozone. This proposal would require private creditors to contribute to crisis resolution. The meeting will move to a discussion of this suggestion, and of the wider questions around sovereign debt in the euro area