European policy makers are considering a host of proposals to eliminate implicit government guarantees, including a new resolution regime, turning some liabilities into bail-in debt that will automatically take losses, depositor-preference regimes that would subordinate unsecured bondholders, and U.K.-style plans to ring-fence certain activities.

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Signals that the endless fumbling over Greece's second bail-out will end in debt restructuring prompted investor flight from core euro-zone countries as well as peripheral ones.

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Years of accumulated deficits, a bank bail-out in 1995, and punishing interest rates have swollen the national debt to a Greek-style 140% of GDP.

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The bail-out deal agreed with Greece in July already included a limited move by private banks to swap existing Greek debt with longer term debt paying lower interest.

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The prognosis was based in part on fears about the public-debt burden that northern countries might have to assume if bail-outs spread.

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