The Euro Area Sovereign Debt Crisis: Safe Haven, Credit Rating Agencies and the Spread of the Fever from Greece, Ireland and Portugal

Since the global financial crisis of 2007-2009, the leading credit rating agencies (CRAs) have faced an increasing level of legal and regulatory scrutiny in the United States (US) and in the European Union (EU). This chapter sheds light on the promise and perils of sovereign credit ratings in the light of the European sovereign debt crisis. The leading CRAs have been blamed for providing investors with inaccurate credit ratings, facing inappropriate incentives and lack of oversight. This chapter addresses the evolving function performed by CRAs over the past century. Traditionally, CRAs are private market actors assessing the creditworthiness of borrowers and debt instruments. Since the first sovereign bond ratings assigned in 1918, the rating business has grown in size and importance. Sovereign ratings supposedly predict financial distress of governments. Their role has shifted over the last four decades. Although they have repeatedly been blamed for being poor predictors of sovereign debt crises, CRAs continue to play a key role in modern capital markets.

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Sovereign Credit_Rating Disclose and Bond Liquidity under Sovereign Debt Crisis

Business and Management Research ◽

10.5430/bmr.v8n2p1 ◽

2019 ◽

Vol 8 (2) ◽

pp. 1

Author(s):

Amir Saadaoui ◽

Mohamed Kriaa

Keyword(s):

Sovereign Debt ◽

Credit Rating ◽

Debt Crisis ◽

Bond Markets ◽

Sovereign Debt Crisis ◽

Rating Agencies ◽

Sovereign Bonds ◽

Daily Data ◽

Before And After ◽

Bond Liquidity

This study examines the effect of the informational content of local credit rating announcements in emerging markets on the liquidity of their bond markets. We analyze the bond liquidity markets across five countries such as Poland, Greece, Spain, Hungary and Turkey. The sample includes daily data about sovereign bonds over the period ranging from July 2009 to January 2014.We mainly focus on the period before and after the sovereign debt crisis. We note that the bond liquidity is affected due to the sign of the rating granted by the rating agencies for each country.

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The Impact of the Sovereign Debt Crisis on Bank Lending Rates in the Euro Area

SSRN Electronic Journal ◽

10.2139/ssrn.2284804 ◽

2013 ◽

Cited By ~ 16

Author(s):

Stefano Neri

Keyword(s):

Euro Area ◽

Sovereign Debt ◽

Debt Crisis ◽

Bank Lending ◽

Sovereign Debt Crisis ◽

Lending Rates ◽

The Impact

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Eurobonds: Three Lessons from China’s “Debt Centralization/Decentralization” Experience

The Economists Voice ◽

10.1515/ev-2020-0020 ◽

2021 ◽

Vol 0 (0) ◽

Author(s):

Zhiyong An

Keyword(s):

Moral Hazard ◽

Euro Area ◽

Sovereign Debt ◽

Debt Crisis ◽

Budget Constraint ◽

Sovereign Debt Crisis ◽

The European Union ◽

Member States ◽

Institutional Mechanism ◽

Previous Series

Abstract Eurobonds, dubbed as Coronabonds in the context of the current coronavirus crisis, are being hotly debated among the euro area member states amid the COVID-19 pandemic. The debate is in many ways a retread of the euro area sovereign debt crisis of 2011–2012. As China’s “debt centralization/decentralization” experience is comparable with the introduction of Eurobonds in the European Union (EU) in terms of institutional mechanism design, we review our previous series of studies of China’s “debt centralization/decentralization” experience to shed some light on the Eurobonds debate. We obtain three key lessons. First, the introduction of Eurobonds in EU is likely to soften the budget constraint of the governments of the euro area member states. Second, it is also likely to strengthen the moral hazard incentives of the governments of the euro area member states to intentionally overstate their budget problems. Finally, the magnitudes of the moral hazard effects generated by the introduction of Eurobonds in EU are likely larger than their respective counterparts in China.

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