There are significant difference between Greece and Ireland sovereign crises. Greece was a crisis of public finance while Ireland is a crisis of private finance from banks.
The possible bail-out of private institutions actually has more market uncertainty and potential contagion because there is more choice on what could be the actions of governments. The bank run problem is also more likely for a financial firm than a country given the shorter-term financing of most banks. It is highly unlikely that governments will be left to default in the EU. Of course, it has happened in the merging markets as ell as developed countries.
On the other hand, it is easier to see governments walking away from financial firm bondholders. The bond holders are more likely to be placed in a first loss position as they rightly should. Given the uncertainty of whether action will be taken and then the reaction across other financial institutions. The Ireland case of the future is more risky. The country bail-out may have less contagion than the case of a country bank failure.
The possible bail-out of private institutions actually has more market uncertainty and potential contagion because there is more choice on what could be the actions of governments. The bank run problem is also more likely for a financial firm than a country given the shorter-term financing of most banks. It is highly unlikely that governments will be left to default in the EU. Of course, it has happened in the merging markets as ell as developed countries.
On the other hand, it is easier to see governments walking away from financial firm bondholders. The bond holders are more likely to be placed in a first loss position as they rightly should. Given the uncertainty of whether action will be taken and then the reaction across other financial institutions. The Ireland case of the future is more risky. The country bail-out may have less contagion than the case of a country bank failure.
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