The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookiesbefore using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

Tensions run high over sovereign debt haircuts

Banks might refuse to underwrite and distribute sovereign debt at risk of principal reduction.

The new year started uneasily in the debt markets, with 10-year Greek government bonds yielding 12.57% – higher than in the depths of the initial sovereign debt panic last May and Irish 10-year governments yielding 9%. Investors’ nerves are jangling as they await the next test of European policymakers’ capacity to contain the damage from the continued deleveraging of the western financial system.

Deutsche Bank points out that combined government and financial debt, which rarely ran above 100% of the GDP of the US, UK, or Europe until the mid-1990s, still stands at unprecedented levels as the fourth anniversary approaches of the financial crisis that began in the summer of 2007. In core Europe combined government and financial debt now stands at 164% of GDP; in the US, it is at 191%; it is at 213% for the UK and 214% in the European periphery. It would seem to be a lot to hope for that the western economies can grow robustly so as to make these debt levels look more comfortably sustainable.

Most debt market participants expect that in 2011 there will be repeats of the occasional closures of the capital markets that borrowers had to cope with in 2010.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree