Greece 2012 and Cyprus 2013

2017 ◽  
Author(s):  
C. Randall Henning
Keyword(s):  
Private Sector ◽  
Euro Area ◽  
Banking System ◽  
Debt Relief ◽  
Debt Restructuring ◽  
Debt Sustainability ◽  
Sustainability Analysis ◽  
Regime Complex ◽  
Private Sector Involvement ◽  
The Imf

Greece posed the greatest challenge among the program countries, while Cyprus, linked to Greece through the banking system and debt restructuring, was the smallest of the country programs. The second Greek program was accompanied by substantial debt relief, but the process of granting it exposed sharp disagreements within the regime complex for crisis finance. The IMF and some euro-area member states advocated private-sector involvement, but split on the sustainability of the remaining official claims on Greece, with the Fund using its debt sustainability analysis as leverage. The case of Cyprus demonstrates that the IMF can be influential even if it contributes a relatively small share of the financing, when it is backed by key creditor states. In both cases, despite substantive conflict, key European creditors adhered faithfully to including the IMF and mediated among the institutions when they became deadlocked.

The Socialization of Greece’s Debt

2019 ◽  
pp. 261-273
Author(s):  
Jerome Roos
Keyword(s):  
Private Sector ◽  
Adjustment Costs ◽  
Pension Funds ◽  
Member States ◽  
Debt Restructuring ◽  
Eu Member States ◽  
Radical Shift ◽  
Private Sector Involvement ◽  
The Eu ◽  
The Imf

In March 2012, Greece opened a tender for a voluntary bond exchange in which its private bondholders could swap their securities for a variety of redenominated debt instruments. This chapter discusses the lead-up to and outcome of this debt restructuring, showing how the debt swap was specifically designed to spare the biggest private bondholders—EU banks—while leaving Greek taxpayers and pensioners to foot the bill for the subsequent hit taken by their own banks and pension funds. It shows how the debt restructuring of 2012 led to a radical shift in Greece's debt profile and creditor composition: from bonds held by private EU banks to official-sector loans from the EU member states and the IMF. By the end of private sector involvement, both the adjustment costs for the crisis and the risk of a future default had been fully socialized.

ECB liquidity may bring Greece a modest relief

2016 ◽  
Keyword(s):  
Commercial Banks ◽  
Private Consumption ◽  
Gdp Growth ◽  
Debt Restructuring ◽  
Debt Sustainability ◽  
Content Type ◽  
Pension Reforms ◽  
The Third ◽  
Sustainability Analysis ◽  
The Imf

Significance The tranche will meet debt repayments falling due until end-2016. The prospect has been held out of debt restructuring if programme commitments are fulfilled. The IMF, which has so far refused participation in the third programme, has tentatively agreed to consider it, subject to another debt sustainability analysis (DSA) before year-end. Impacts Business will be helped by the settlement of a large part of outstanding government arrears. The injection of liquidity will help offset the dampening effect on GDP growth caused by required tax and pension reforms. Deposits with commercial banks will remain frozen for at least a year, a huge brake on private consumption and investment.

Restructuring Euro Area Sovereign Debt: Have the Options Narrowed?

2020 ◽  
Vol 6 (1) ◽  
pp. 125-147
Author(s):  
W Mark C Weidemaier
Keyword(s):  
Human Rights ◽  
Euro Area ◽  
Sovereign Debt ◽  
Debt Relief ◽  
European Convention ◽  
Debt Restructuring ◽  
European Stability Mechanism ◽  
Local Law ◽  
The Law ◽  
Legal Constraints

ABSTRACT This article examines the intersection between two key attributes of sovereign debt governance in the Euro Area. First, sovereigns mostly issue bonds governed by their own law. This ‘local law advantage’ should make debt restructuring comparatively easy, as the sovereign can change the law to reduce its debt. The second attribute is the so-called ‘Euro CAC’, which is a contract-based restructuring mechanism mandated by the Treaty Establishing the European Stability Mechanism (the ESM Treaty). The Euro CAC lets a bondholder supermajority approve a restructuring and bind dissenters. Since 2013, nearly all Euro Area sovereign debt has included the clause. Many believe the ESM Treaty requires governments to use the Euro CAC to restructure. But if so, the Treaty is a suicide pact, for the design of the Euro CAC is flawed. In a meaningful subset of cases, the clause will not provide adequate debt relief. This article makes two primary contributions. First, using an Italian restructuring as an example, it explains why the ESM Treaty does not, in fact, require the use of the Euro CAC. Second, it examines the legal constraints—the most pertinent of which derive from the European Convention on Human Rights—that do restrict the use of local-law advantage.

scholarly journals The IMF Debt Sustainability Analysis: Issues and Problems

2015 ◽  
Vol 6 (2) ◽  
Author(s):  
Martin Guzman ◽  
Daniel Heymann
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Sovereign Debt ◽  
Analysis Framework ◽  
Debt Sustainability ◽  
Yield Spreads ◽  
Sustainability Analysis ◽  
Market Interest Rate ◽  
Evaluation Exercise ◽  
The Imf

AbstractThis paper reviews the IMF DSA (Debt Sustainability Analysis) framework. We first examine the concept of debt sustainability, and argue that the evaluation exercise necessarily entails putting into question market expectations embodied in yield spreads. When the views of the analyst on the capacity of debt repayment differ from the ones reflected in market interest rate premiums, the use of market interest rates for assessing debt sustainability leads to an inconsistency that will in turn bias the assessment. We then show that IMF projections for assessing debt sustainability have been repeatedly biased, which may have contributed to distort the timing of sovereign debt restructurings and the consequent processes of renegotiation. We conclude with a discussion on how the existing DSA framework could be improved.

Germany to wait out major EU decisions until post-2017

2015 ◽  
Keyword(s):  
Euro Area ◽  
Debt Relief ◽  
French Elections ◽  
Content Type ◽  
Greek Crisis ◽  
Eu Referendum ◽  
The Uk ◽  
Party Family ◽  
The Imf

Significance The Greek crisis has exposed Germany's euro-area dominance more clearly than ever -- to both Germany's partners and Germany, and to the discomfort of both. Merkel's decisions in the crisis have reflected in part her wish to buy time until after the 2017 German and French elections, and her belief in the continuing importance of the Franco-German relationship. Impacts Belying German hopes the three-year Greek deal will buy time until after 2017, October could see a new clash over debt relief and the IMF. Given the alternatives in Paris, Merkel will hope more strongly than usual for a new French president from her own party family. Waiting for stronger leadership in Paris could risk fuelling French eurosceptics' charges that France lacks influence. Seeing major 'future EU' initiatives only after the 2017 German and French polls, Berlin would like the UK EU referendum also over by then. Germany's wish to postpone major EU reforms will limit the scope of any pre-referendum deal with London.

IMF unlikely to resolve Zambia's debt conundrum

2020 ◽  
Keyword(s):  
Private Sector ◽  
Central Bank ◽  
Global Markets ◽  
Debt Restructuring ◽  
Debt Sustainability ◽  
Content Type ◽  
Common Framework ◽  
Drying Up ◽  
To Come ◽  
Central Bank Governor

Significance While the G20's new Common Framework for Debt Treatments provides a new mechanism for debt restructuring, it also requires Zambia to convince the IMF that it has disclosed all of its obligations and has a path to debt sustainability -- something President Edgar Lungu and the ruling Patriotic Front (PF) are unwilling to do before next year’s elections. Impacts Zambia’s inability to borrow on global markets will hasten the kwacha's depreciation, which has dropped sharply against the dollar in 2020. With forex drying up, the new Lungu-aligned central bank governor is likely to come under more pressure to print kwachas before the polls. A protracted legal dispute with bondholders could make Zambia a poster child for Western campaigners demanding private-sector debt relief.

scholarly journals Sovereign Debt Restructuring: A Modest Proposal

2021 ◽  
Vol 4 (1) ◽  
pp. p8
Author(s):  
Colin Ellis
Keyword(s):  
Sovereign Debt ◽  
Correlated Errors ◽  
Debt Restructuring ◽  
Debt Sustainability ◽  
Sustainability Analysis ◽  
Modest Proposal ◽  
Debt Dynamics ◽  
Sovereign Defaults

Many sovereigns, including weaker credits, have taken on substantial debt during the COVID-19 pandemic. This raises the prospect of future defaults and sovereign restructurings, which will be informed by debt-sustainability analysis. But when analyzing notable recent sovereign defaults, we find a pattern of serially correlated errors: the analysis at the time of the restructuring is too optimistic about future sovereign debt dynamics. In light of this, I propose that future sustainability analysis should be based on more pessimistic expectations. In turn, this implies that sovereign creditors should face larger losses in future restructurings.

scholarly journals Barbados

2019 ◽  
Vol 19 (370) ◽  
Author(s):  
Keyword(s):  
Private Sector ◽  
Economic Recovery ◽  
International Reserves ◽  
Economic Uncertainty ◽  
Debt Restructuring ◽  
Debt Sustainability ◽  
Domestic Debt

The Barbadian authorities continue to make good progress in implementing the comprehensive Economic Recovery and Transformation (BERT) plan aimed at restoring fiscal and debt sustainability, rebuilding reserves, and increasing growth. Since May 2018, international reserves have increased from a low of US$220 million (or 5-6 weeks of import coverage) to more than US$600 million at end- October 2019. The completion of a domestic debt restructuring in November 2018 has been very helpful in reducing economic uncertainty, and the terms agreed with domestic creditors have helped to put debt on a clear downward trajectory. Risks to the outlook are elevated but growth could surprise on the upside, with private sector confidence now increasing.

Angola's renewed China dependence will bring more pain

2020 ◽  
Keyword(s):  
Saudi Arabia ◽  
Debt Relief ◽  
Short Term ◽  
Debt Sustainability ◽  
Content Type ◽  
Common Framework ◽  
Ruling Party ◽  
The Imf

Significance However, China’s insistence on negotiating debt relief bilaterally and on a loan-by-loan basis will delay efforts to reschedule borrowing, jeopardising Angola’s debt sustainability. Impacts Angola’s only hope for widespread Chinese debt relief lies in an unlikely imminent G20 agreement of a Common Framework for Debt Treatments. A short-term reduction in crude shipped to China to service debt leaves opportunities for Saudi Arabia and Russia to increase their exports. The IMF may expect Angola to seek an extension to its current programme, but political calculations mean the ruling party may go it alone.

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