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Revisiting Sovereign Bankruptcy
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Revisiting Sovereign Bankruptcy

Committee on International Economic Policy and Reform

Lee C. Buchheit, Anna Gelpern, Mitu Gulati, Ugo Panizza, Beatrice Weder di Mauro and Jeromin Zettelmeyer
Brookings Institution Press, 2013
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Editorial Rating

7

Qualities

  • Analytical
  • Innovative
  • Background

Recommendation

When people and companies run into deep financial trouble, bankruptcy provides an orderly resolution. For countries in dire financial straits, however, gaining a fresh start through bankruptcy is not an option. Without clearly defined paths for debtor countries, creditors may be relegated to “debt purgatory,” and countries may face complex or unsatisfactory solutions when fiscal trouble strikes. The debt crisis in Greece and the continuing economic threats in Europe underscore a need for more formalized arrangements to protect both debtors and creditors in a sovereign debt crisis. This paper from the independent Committee on Economic Policy and Reform offers valuable insight into the problems and possible solutions surrounding troubled sovereign debt, but you may wonder if nations’ ingrained, sometimes-sloppy borrowing habits can ever change. getAbstract recommends this report to anyone interested in the nuances and dangers of lending to countries that have feasted too enthusiastically at the world’s debt buffet.

Take-Aways

  • In the last few decades, more countries have faced sovereign debt crises.
  • Countries that raise debt to unsustainable levels are at the heart of these crises.
  • Creditors have few protections. Even courtroom victors cannot seize sovereign assets.

About the Authors

The Committee on International Economic Policy and Reform, an unaffiliated group of former central bankers, academics and government officials, studies global economic issues and proposes solutions that “reconcile national interests with broader global interests.”

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