Orderly Sovereign Default in the EU: a Strong Case for European Reguation

This paper endeavours to offer a view on the need for an orderly sovereign default process in the EU. Section 1 provides an introduction. Section 2 illustrates why a Greek or other peripheral Economic and Monetary Union (EMU) country default would not trigger a systematically relevant banking crisis that could entail the ned of additional (substantial) state aids. Section 3 briefly comments on the indirect but relevant costs associated with a sovereign default in the EMU area. Section 4 considers the May 2010 sovereigns' rescue package and whether it is compatible with an orderly default procedure. Section 5 calls for the swift introduction of a European Statutory sovereign default procedure also to reconcile properly the May 2010 initiatives with their legal basis. Section 6 lists a series of statutory provisions that should be incorporated into the European sovereign defautl procedure. Section 7 concludes.