The official position of the financial and political authorities of Europe is that there will never be any restructuring of Euro area sovereign debt. But the ability of governments to raise sufficient domestic resources to service their debts cannot be guaranteed; so this official position implies...

With this paper, our objective is to empirically study public debt sustainability by estimating a fiscal reaction function where the primary balance relative to GDP is assumed to be a function of the public debt to GDP ratio of the previous year and of other macroeconomic variables. In...

The euro area suffers from excessive public debt, which is the primary cause of the so-called fragmentation. It should be remedied by fiscal consolidation instead of the quasi-fiscal activities of the European Central Bank, which are inconsistent with its legal status, compromise its...

We investigate what happens when the fiscal authorities do not react to rising public debt so that the unpleasant task of fiscal sustainability falls upon the Central Bank (CB). In particular, we explore whether the CB's bond purchases in the secondary market can restore stability and...