Martin Guzman, José Antonio Ocampo, and Joseph E. Stiglitz (eds)
- Published in print:
- 2016
- Published Online:
- January 2017
- ISBN:
- 9780231179263
- eISBN:
- 9780231542029
- Item type:
- book
- Publisher:
- Columbia University Press
- DOI:
- 10.7312/columbia/9780231179263.001.0001
- Subject:
- Economics and Finance, Macro- and Monetary Economics
The current approach to resolving sovereign debt crises does not work: sovereign debt restructurings come too late and address too little. Though unresolved debt crises impose enormous costs on ...
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The current approach to resolving sovereign debt crises does not work: sovereign debt restructurings come too late and address too little. Though unresolved debt crises impose enormous costs on societies, many recent restructurings have not been deep enough to provide the conditions for economic recovery (as illustrated by the Greek debt restructuring of 2012). And if the debtor decides not to accept the terms demanded by the creditors, finalizing a restructuring can be slowed by legal challenges (as illustrated by the recent case of Argentina, deemed as “the trial of the century”). A fresh start for distressed debtors is a basic principle of a well-functioning market economy, yet there is no international bankruptcy framework for sovereign debts. While this problem is not new, the United Nations and the global community are now willing to do something about it. Providing guidance for those who intend to take up reform, this book assesses the relative merits of various debt-restructuring proposals, especially in relation to the main deficiencies of the current nonsystem. With contributions by leading academics and practitioners, Too Little, Too Late reflects the overwhelming consensus among specialists on the need to find workable solutions.Less
The current approach to resolving sovereign debt crises does not work: sovereign debt restructurings come too late and address too little. Though unresolved debt crises impose enormous costs on societies, many recent restructurings have not been deep enough to provide the conditions for economic recovery (as illustrated by the Greek debt restructuring of 2012). And if the debtor decides not to accept the terms demanded by the creditors, finalizing a restructuring can be slowed by legal challenges (as illustrated by the recent case of Argentina, deemed as “the trial of the century”). A fresh start for distressed debtors is a basic principle of a well-functioning market economy, yet there is no international bankruptcy framework for sovereign debts. While this problem is not new, the United Nations and the global community are now willing to do something about it. Providing guidance for those who intend to take up reform, this book assesses the relative merits of various debt-restructuring proposals, especially in relation to the main deficiencies of the current nonsystem. With contributions by leading academics and practitioners, Too Little, Too Late reflects the overwhelming consensus among specialists on the need to find workable solutions.
Martin Guzman and Joseph E. Stiglitz
- Published in print:
- 2016
- Published Online:
- January 2017
- ISBN:
- 9780231179263
- eISBN:
- 9780231542029
- Item type:
- chapter
- Publisher:
- Columbia University Press
- DOI:
- 10.7312/columbia/9780231179263.003.0002
- Subject:
- Economics and Finance, Macro- and Monetary Economics
Recent controversies surrounding sovereign debt restructurings show the weaknesses of the current market-based system in achieving efficient and fair solutions to sovereign debt crises. This article ...
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Recent controversies surrounding sovereign debt restructurings show the weaknesses of the current market-based system in achieving efficient and fair solutions to sovereign debt crises. This article reviews the existing problems and proposes solutions. It argues that improvements in the language of contracts, although beneficial, cannot provide a comprehensive, efficient, and equitable solution to the problems faced in restructurings–but there are improvements within the contractual approach that should be implemented. Ultimately, the contractual approach must be complemented by a multinational legal framework that facilitates restructurings based on principles of efficiency and equity. Given the current geopolitical constraints, in the short-run we advocate the implementation of a “soft law” approach, built on the recognition of the limitations of the private contractual approach and on a set of principles – most importantly, the restoration of sovereign immunity – over which there may be consensus. We suggest that in a context of political economy tensions it should be impossible for a government to sign away the sovereign immunity either for itself or successor governments. The framework could be implemented through the United Nations, or it could prompt the creation of a new institution.Less
Recent controversies surrounding sovereign debt restructurings show the weaknesses of the current market-based system in achieving efficient and fair solutions to sovereign debt crises. This article reviews the existing problems and proposes solutions. It argues that improvements in the language of contracts, although beneficial, cannot provide a comprehensive, efficient, and equitable solution to the problems faced in restructurings–but there are improvements within the contractual approach that should be implemented. Ultimately, the contractual approach must be complemented by a multinational legal framework that facilitates restructurings based on principles of efficiency and equity. Given the current geopolitical constraints, in the short-run we advocate the implementation of a “soft law” approach, built on the recognition of the limitations of the private contractual approach and on a set of principles – most importantly, the restoration of sovereign immunity – over which there may be consensus. We suggest that in a context of political economy tensions it should be impossible for a government to sign away the sovereign immunity either for itself or successor governments. The framework could be implemented through the United Nations, or it could prompt the creation of a new institution.
José Antonio Ocampo
- Published in print:
- 2016
- Published Online:
- January 2017
- ISBN:
- 9780231179263
- eISBN:
- 9780231542029
- Item type:
- chapter
- Publisher:
- Columbia University Press
- DOI:
- 10.7312/columbia/9780231179263.003.0011
- Subject:
- Economics and Finance, Macro- and Monetary Economics
The chapter provides a history of debt crises resolution and the rise of the current “non-system,” which mixes the Paris Club for official debts, voluntary renegotiations with private creditors and ...
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The chapter provides a history of debt crises resolution and the rise of the current “non-system,” which mixes the Paris Club for official debts, voluntary renegotiations with private creditors and occasional ad hoc debt-relief initiatives (the Brady Plan and Highly-Indebted Poor Countries and Later Multilateral Debt Relief Initiatives). This system, he argues, not only provides inadequate solutions but does not guarantee equitable treatment, neither of different debtors nor of different creditors. He then proposes a multilateral mechanism for sovereign debt restructuring that offers a sequence of voluntary negotiations, mediation and eventual arbitration with pre-established deadlines, similar in a sense to the World Trade Organization’s dispute settlement mechanism.Less
The chapter provides a history of debt crises resolution and the rise of the current “non-system,” which mixes the Paris Club for official debts, voluntary renegotiations with private creditors and occasional ad hoc debt-relief initiatives (the Brady Plan and Highly-Indebted Poor Countries and Later Multilateral Debt Relief Initiatives). This system, he argues, not only provides inadequate solutions but does not guarantee equitable treatment, neither of different debtors nor of different creditors. He then proposes a multilateral mechanism for sovereign debt restructuring that offers a sequence of voluntary negotiations, mediation and eventual arbitration with pre-established deadlines, similar in a sense to the World Trade Organization’s dispute settlement mechanism.
Anna Gelpern, Ben Heller, and Brad Setser
- Published in print:
- 2016
- Published Online:
- January 2017
- ISBN:
- 9780231179263
- eISBN:
- 9780231542029
- Item type:
- chapter
- Publisher:
- Columbia University Press
- DOI:
- 10.7312/columbia/9780231179263.003.0007
- Subject:
- Economics and Finance, Macro- and Monetary Economics
Count the Limbs: Designing Robust Aggregation Clauses in Sovereign Bonds, by Anna Gelpern, Ben Heller, and Brad Setser
Count the Limbs: Designing Robust Aggregation Clauses in Sovereign Bonds, by Anna Gelpern, Ben Heller, and Brad Setser
Yanis Varoufakis
- Published in print:
- 2016
- Published Online:
- January 2017
- ISBN:
- 9780231179263
- eISBN:
- 9780231542029
- Item type:
- chapter
- Publisher:
- Columbia University Press
- DOI:
- 10.7312/columbia/9780231179263.003.0006
- Subject:
- Economics and Finance, Macro- and Monetary Economics
Greek Debt Denial: A Modest Debt Restructuring Proposal and Why It Was Ignored, by Yanis Varoufakis
Greek Debt Denial: A Modest Debt Restructuring Proposal and Why It Was Ignored, by Yanis Varoufakis
Jürgen Kaiser
- Published in print:
- 2016
- Published Online:
- January 2017
- ISBN:
- 9780231179263
- eISBN:
- 9780231542029
- Item type:
- chapter
- Publisher:
- Columbia University Press
- DOI:
- 10.7312/columbia/9780231179263.003.0013
- Subject:
- Economics and Finance, Macro- and Monetary Economics
The chapter discusses the “institutionalization” of a multinational framework for sovereign debt restructuring. In Kaiser’s view, the institutionalization should comply to three basic principles: ...
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The chapter discusses the “institutionalization” of a multinational framework for sovereign debt restructuring. In Kaiser’s view, the institutionalization should comply to three basic principles: first, it needs to restructure debt in a single comprehensive process, with no payment obligations being exempted from the process; second, it needs to allow for an impartial decision making about the terms of any debt restructuring; and third, this decision must be based on an impartial assessment of the debtor’s situation. He claims that there are not many historical precedents for a sovereign debt restructuring which complies with these conditions, but the case of Indonesia in 1969 may be inspiring. He argues that a “Sovereign debt Restructuring Liaison Office” mandated by the UN and run independently from any debtor or creditor interference could be a catalytic element with the potential to overcome the shortcomings of existing procedures. In this view, it could facilitate a comprehensive negotiation format with all stakeholders around the table; it could provide an impartial and thus realistic assessment of the need for debt relief; and it could suggest an un-biased solution. Such an “office” could be established immediately as an outcome of the present UN-General Assembly consultation process and then develop its rules, regulations and infrastructure over time.Less
The chapter discusses the “institutionalization” of a multinational framework for sovereign debt restructuring. In Kaiser’s view, the institutionalization should comply to three basic principles: first, it needs to restructure debt in a single comprehensive process, with no payment obligations being exempted from the process; second, it needs to allow for an impartial decision making about the terms of any debt restructuring; and third, this decision must be based on an impartial assessment of the debtor’s situation. He claims that there are not many historical precedents for a sovereign debt restructuring which complies with these conditions, but the case of Indonesia in 1969 may be inspiring. He argues that a “Sovereign debt Restructuring Liaison Office” mandated by the UN and run independently from any debtor or creditor interference could be a catalytic element with the potential to overcome the shortcomings of existing procedures. In this view, it could facilitate a comprehensive negotiation format with all stakeholders around the table; it could provide an impartial and thus realistic assessment of the need for debt relief; and it could suggest an un-biased solution. Such an “office” could be established immediately as an outcome of the present UN-General Assembly consultation process and then develop its rules, regulations and infrastructure over time.