A Sovereign Chapter 9 Filing?
As the crisis in our financial system slowly fades out, a new and possible more severe crises emerge; the sovereign debt crisis.
These problems have been highlighted lately by countries like Dubai, Greece, Iceland and Spain, among others. There’s no clear solution on the table, yet. And the measures discussed by our politicians are mostly short-term-quick-fix arrangements. So, we need permanent solutions on how to handle this long term problem. The extensive need and political opportunity have aligned, and the risks of not taking action are too serious to be ignored.
We need good ideas. If you have any suggestions, please share.
“In 2001, Anne Krueger of the IMF proposed a Sovereign Debt Restructuring Mechanism (SDRM) where a super-majority of creditors would vote to negotiate new terms under a restructuring agreement,” researcher Anna Gibson with the international think tank Re-Define writes in a blog post.
“This includes the internationalization of Chapter 9 of the US bankruptcy code, originally intended to provide financially distressed municipalities with protection from creditors. Like municipalities, sovereign nations are unable to be liquidated, and thus their approach to debt resolution must come with realistic outcomes in mind for both debtors and creditors, whilst the model also includes the treatment of both bilateral and multilateral debt, a considerable deficiency of the SDRM proposed by IMF,” she writes.
What do you think?
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