eprintid: 1567856 rev_number: 22 eprint_status: archive userid: 608 dir: disk0/01/56/78/56 datestamp: 2017-08-02 15:28:30 lastmod: 2020-02-12 20:58:04 status_changed: 2017-11-09 15:35:53 type: article metadata_visibility: show creators_name: De Grauwe, P creators_name: Ji, Y creators_name: Steinbach, A title: The EU debt crisis: Testing and revisiting conventional legal doctrine ispublished: pub divisions: UCL divisions: A01 divisions: B03 divisions: D92 keywords: Eurozone, Government debt, No-bailout clause, Ban on monetary financing, Panel data, Lender of last resort note: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions. abstract: Controversies surrounding the European sovereign debt crisis loom prominent in the public debate. From a legal perspective, the no-bailout rule and the ban on monetary financing constitute the main principles governing the legality review of financial assistance and liquidity measures. Interpretation of these rules is full of empirical claims. According to conventional legal doctrine, bond spreads only depend on the country’s debt position, largely ignoring other causal factors including liquidity. We test the hypotheses implicit in conventional legal reasoning. We find evidence that a significant part of the surge in the spreads of the peripheral Eurozone countries was disconnected from underlying fundamentals and particularly from a country’s debt position, and was associated rather strongly with market sentiments and liquidity concerns. We apply our empirical findings to the legal principles as interpreted by recent jurisprudence arguing that application of the no-bailout principle and the ban on monetary financing should be extended to capture non-debt related factors. Also, the empirical results suggest taking recourse to alternative legal grounds for reviewing the legality of anti-crisis instruments and allowing for a lender of last resort in the euro zone. date: 2017-06-03 date_type: published official_url: http://doi.org/10.1016/j.irle.2017.05.002 oa_status: green full_text_type: other language: eng primo: open primo_central: open_green article_type_text: Article verified: verified_manual elements_id: 1408270 doi: 10.1016/j.irle.2017.05.002 lyricists_name: Ji, Yuemei lyricists_id: YJIXX03 actors_name: Ji, Yuemei actors_id: YJIXX03 actors_role: owner full_text_status: public publication: International Review of Law and Economics volume: 51 number: C pagerange: 29-37 issn: 0144-8188 citation: De Grauwe, P; Ji, Y; Steinbach, A; (2017) The EU debt crisis: Testing and revisiting conventional legal doctrine. International Review of Law and Economics , 51 (C) pp. 29-37. 10.1016/j.irle.2017.05.002 <https://doi.org/10.1016/j.irle.2017.05.002>. Green open access document_url: https://discovery.ucl.ac.uk/id/eprint/1567856/1/Grauwe_Ji_Steinbach__EU-debt-crisis-paper-29%20May%202017-accepted%20version.pdf