The Present State of the Discussion on Restructuring Sovereign Debts: Which Specific Sovereign Insolvency Procedure?

Fachartikel 323

Fachbereich
Volkswirtschaftslehre
Fachrichtung
Finanzwissenschaft
Working Paper
2005
Sprache
englisch

Beschreibung

The paper discusses the four proposals presently on the table: Collective Action Clauses, a voluntary Code of Good Conduct for debt re-negotiation, and two models of sovereign insolvency: the IMF’s SDRM and my debt arbitration based on the US Chapter 9 (municipal insolvency). While the first two combine well with any form of sovereign insolvency, the two insolvency models contradict each other. After showing the very few similarities between these models, concerns about the SDRM are discussed that stem from the self-serving character of the IMF’s proposal. Finally, the main distinctive elements of an international Chapter 9 are presented: obeying the Rule of Law, fairness to all affected, respecting human rights (debtor protection), safeguarding the sovereignty of debtors, improved sustainability of a solution found after transparent negotiations, and speedy implementation. Considering the crippling damages of the debt overhang on debtor economies quick and fair solutions are urgently needed.

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