An important step, no doubt, but still a long and arduous way to go. A mechanism – without further specification – might well bring debtor countries, the poor, but even bona fide private creditors out of the frying pan, but right into the fire.
As Bodo mentions “The most relevant practical work, on the other hand, was the IMF’s concept for a Sovereign Debt Restructuring Mechanism” – but not even the proposal many NGOS including EURODAD have propagated over years - one cannot but point out that an SDRM-type solution would have no debtor protection, no guarantee of human rights standards, no voice of those affected and would firmly put one or several (most likely
public) creditor(s) in the driver’s seat. Vultures might well be stopped that way, but at huge costs because – again referring to the SDRM – one has to agree with Ms Krueger:
"The Fund would only influence the process as it does now, through its normal lending decisions" (Krueger, “Sovereign Debt Restructuring and Dispute Resolution", June 2002, p.4). This would no doubt be cause for joy for some, but not necessarily for all.
Therefore it is mandatory to start discussing what features the solution should have and advocate a fair and proper insolvency procedure that finally puts an end to the unjustified differences in how insolvent debtors are treated now, depending on who or what (sovereign country) they are.
Dept. of Economics,
Univ of Vienna, Austria