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List of events
|1||11.02.2010||First indication of a possible intervention (statement of EMU leaders)|
|2||25.03.2010||Statement of prospect for EU-IMF loans to Greece|
|3||02.05.2010||EU-IMF and Greece agree on bailout (Greek Loan Facility)|
|4||09–10.05.2010||Ecofin meeting, decision about EFSM/EFSF|
|5||04.08.2010||Start of EFSF fully functioning|
|6||28–19.10.2010||European Council (EC) decides to start consultations on a permanent resolution mechanism|
|7||28.11.2010||Agreement on assistance to Ireland using EFSM/EFSF|
|8||16–17.12.2010||EC launches Treaty revision procedure to incorporate a permanent stability mechanism|
|9||25.01.2011||Landmark EFSF bond auction to facilitate Irish bailout|
|10||24–25.03.2011||EC agrees on establishing the ESM as a permanent bailout fund|
|11||16.05.2011||Agreement on assistance to Portugal using EFSM/EFSF|
|12||21.07.2011||Enhancement of EFSF/ESM powers (recapitalization of banks, intervention in secondary markets)|
|13||11.29.2011||Agreement on using the EFSF for Partial Protection Certificates issued together with the beneficiary member state's bonds (20–30% protection)|
|14||09.12.2011||EU leaders' statement on ESM to be brought into force in July 2012|
|15||21.02.2012||Agreement on second Greek rescue package|
|16||09.03.2012||Agreement with creditors on Greek debt restructuring|
|17||20.07.2012||Loans approved for Spain to recapitalise banks, utilizing ESM|
|18||27.09.2012||Establishment of ESM|
|19||08.10.2012||ESM commences its operations after inaugural meeting|
|20||12.10.2012||First batch of paid-in capital was transferred by all ESM member states|
|21||01.01.2013||Standardized CACs kick in for new government bonds (>1 year maturity)|
|22||12.04.2013||Agreement on Cypriot rescue package|
|23||12.07.2015||Agreement on third Greek rescue package|
|24||09.10.2017||Eurogroup meeting, proposal of Schäuble on ESM and debt restructuring|
|25||04.12.2018||EC approves package of measures to further strengthen the ESM|
|26||14.06.2019||Announcement of Eurogroup broadly agreeing on revised ESM Treaty|
|27||20.11.2019||Italian Foreign Minister publicly rejects ESM reform that ‘crushes Italy’|
|28||12.12.2019||Italian Premier tells Parliament ESM reform should be adopted as part of wider financial reforms|
|29||04.12.2019||Eurogroup agrees in principle on elements of ESM reform|
Source: authors. Events (announcements and dates) are collected from literature quoted in Chapter 2 and double-checked by using official EU websites (European Commission/Council, ESM).
Note: Each date in the table is considered as part of a 3-day time window (t − 1, t, t + 1) in order to capture effects of the unfolding event (e.g. anticipations, news and official acts). For 2-day events, preceding and subsequent days are also added accordingly.
Certainly, monetary financing is prohibited in many countries. However, this is ultimately a legal ban which can be practically ‘circumvented’ or neglected in cases of emergency.
‘Eurobond’ refers to a hypothetical mutual debt obligation which EMU members could issue jointly to finance state budgets. Proposals to create such bonds have been common since the start of the euro crisis. See for example Delpla – Weizsäcker (2010) or a recent suggestion by nine EMU countries to introduce a ‘coronabond’ as a response to the catastrophe caused by the COVID-19 pandemic (RTE 2020).Common bonds, if formally created, would have had lower yields compared to those of periphery sovereign bonds during the 2010–2012 euro crisis. Bonds of EMU bailout funds could be regarded as some kind of a ‘Eurobond’ (a mutual contingent liability), but sizeable gains in interest rates were not passed on to the troubled countries. Instead, loans were extended at rather punitive rates to avoid ‘moral hazard’ (‘transfers’) in the first place.
The end of negative correlations between daily changes of yields of core versus periphery countries.
There are no data on bonds with 1-year maturity for Spain up until 8 August 2011 as no benchmark yields are provided by Bloomberg in this case, and no other bonds could be used as a substitute, either.
Note that if Events turns out to be significant, dyield is shifted (ceteris paribus) on those days which are in a 3-day ‘time window’ (i.e. if Events = 1). This technically implies (α + β1) as the intercept, but α itself is time-invariant.