Frederik Eidam

Policy papers


Keynote at the ZEW Lunch Debate Reforming the Eurozone: How to Handle Sovereign Debt? in Brussels in March 2019 (slides)

Media coverage: ZEW News (in German), ZEW top ten reform priorities for the EU and the Eurozone (in German)

Abstract:

This paper critically assesses several dimensions of a sovereign debt restructuring mechanism (SDRM) for the euro area. The novelty of our analysis is that we abstain from recommending one ideal model for a restructuring mechanism. Instead, we apply a menu-type approach. For five key institutional SDRM dimensions, we discuss the underlying fundamental trade-offs and discuss the pros and cons of different design choices. Specifically, we investigate the following SDRM dimensions: (i) the institutional assignments of responsibilities, (ii) the condition or decision rule that triggers a debt restructuring, (iii) the design and size of debt restructuring, (iv) the role and details of collective action clauses (CACs), and (v) the safeguards for financial stability in support for a SDRM. We conclude that there is no such thing as the single optimal SDRM. Design decisions require judgements on the underlying trade-offs and related assumptions on relative costs. Also, the search for an appropriate euro area SDRM design can benefit from complementarities. Ambition in one dimension can offer more degrees of freedom in another dimension. Our analysis implies that there is no convincing reason to further taboo the search for a euro area SDRM, as there are ways to combine the opportunities of a credible SDRM with financial stability.


Preface:

Over the last year, exchanges that were initiated by the ZEW’s SEEK-conference on ‘regulating sovereign debt restructuring in the eurozone’ resulted in vivid discussions on more feasible sovereign debt restructurings in the euro area. This policy report, edited by Frederik Eidam and Friedrich Heinemann, summarizes these discussions by collecting several contributions on different aspects of the topic. Founded in different perspectives, contributors sometimes provide different conclusions, or highlight different choice options and their underlying trade-offs. However, common to all authors is the aim to increase the resilience of the European Monetary Union and to contribute on the debate on the European reform agenda.


Cited in the GCEE’s Annual Report 2016/2017 to Chancellor Angela Merkel

Abstract:

This paper studies the maturity structure of sovereign debt in the euro area and the penetration of the sovereign debt stock with a new type of collective action clauses (CACs), labeled Creditor Participation Clauses (CPCs). The first section describes the data. The simulation assumptions for the penetration of the sovereign debt stock with newly issued CPC bonds are described in section two. Section three presents the simulation results.


In: Johanna Hey and Sascha Steffen: Steuerliche Zinstypisierungen und Niedrigzinsumfeld, Institut Finanzen und Steuern 511, 2016

Abstract:

In den weltweit führenden Industrienationen sind die Zinssätze nunmehr seit mehreren Jahren auf historisch niedrigem Niveau. Bereits seit den 1980er Jahren ist der Trend tendenziell sinkender Renditen für Staats- und Unternehmensanleihen zu beobachten. In den 1980er und 1990er Jahren ist der Rückgang der Zinsen zu einem großen Teil auf gesunkene Inflation und gesunkene Inflationserwartung zurückzuführen. In den 2000er Jahren resultierte vor allem die Geldschwemme der ölproduzierenden Staaten und China in der verstärkten Nachfrage nach Staatsanleihen von Industrienationen, sodass die Renditen weiter fielen. Seit der Finanzkrise und der europäischen Schuldenkrise sind die niedrigen Zinsen auf die gestiegene Nachfrage nach sicheren Staatsanleihen in Reaktion auf die gestiegene Unsicherheit, die intensiven Deleveraging-Bemühungen im Unternehmens- und Finanzsektor sowie langfristig niedrige Wachstumserwartungen zurückzuführen.