This paper seeks to understand the interplay between banks, bank regulation, sovereign default risk and central bank guarantees in a monetary union. I assume that banks can use sovereign bonds for repurchase agreements with a common central bank, and that their sovereign partially backs up any...

This paper looks at the planned austerity measures in Spain, the rationale for the spending cuts and tax increases, likely outcomes for future debt-to-GDP ratios, and the probable results of alternative policies.