EconPapers    
Economics at your fingertips  
 

Debt Restructuring in the Euro Area: How Can Sovereign Debt Be Restructured More Effectively?

Christoph Grosse Steffen and Julian Schumacher

DIW Economic Bulletin, 2014, vol. 4, issue 10, 19-27

Abstract: The International Monetary Fund (IMF) stated in spring of this year that a more timely restructuring of Greece’s sovereign debt would have been beneficial. But what are the available options for early debt restructuring? The report argues that current reforms in the Euro area, in particular, introducing collective action clauses, are unlikely to be sufficient in their present form. Alternatively, a statutory solution in the form of an international or European insolvency regime for sovereign states is difficult to implement politically. Therefore, the contractual approach to debt restructuring should be facilitated by redesigning future contracts for bonds in the euro area. Specifically, more powerful collective action clauses should be included in bond contracts and the ratable payment provision of all creditors should be reformed in order to limit the impact of legal disputes in the event of a debt restructuring. This approach would simplify future debt restructuring operations and make the no-bailout rule more credible, thus re-activating the disciplinary effect of interest rates on governments.

Keywords: Sovereign debt; International financial assistance; Holdout; Coordination problem; Collective action clauses (search for similar items in EconPapers)
JEL-codes: D78 F34 K12 K33 (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed

Downloads: (external link)
http://www.diw.de/documents/publikationen/73/diw_0 ... n_bull_2014-10-4.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:diw:diwdeb:2014-10-4

Access Statistics for this article

More articles in DIW Economic Bulletin from DIW Berlin, German Institute for Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Bibliothek ().

 
Page updated 2021-04-12
Handle: RePEc:diw:diwdeb:2014-10-4