# The Euro Area needs a public debt restructuring mechanism

**Published:** 2014-04-02  
**Categories:** Nyheter och pressmeddelanden  
**URL:** https://www.etla.fi/sv/aktuellt/nyheter-och-pressmeddelanden/euro-area-public-debt-restructuring-mechanism/

The Euro Area needs an orderly public debt restructuring mechanism, argue Managing Director **Vesa Vihriälä** and Professor **Beatrice Weder di Mauro** in a column published on the VoxEU portal. Making market discipline credible through an orderly debt restructuring mechanism is a promising alternative to contain moral hazard associated with mutualisation of public debt, which has been proposed as an attractive way to overcome the debt overhang, a drag and risk on growth in Europe.

By combining such a mechanism with a strictly regulated temporary mutualisation scheme or perhaps even a well-designed debt conversion scheme, one might both reduce the current debt overhang in an orderly fashion and cement strong incentives against over-borrowing in the future. Without a debt restructuring mechanism, the proposed ideas to ease the burden of consolidation would be far too risky, the authors think.

Read the column on the **[VoxEU](http://www.voxeu.org/article/orderly-debt-reduction-rather-permanent-mutualisation-way-go)** portal.