The Politics That the Euro Needs

2017 ◽  
Author(s):  
Martin Sandbu
Keyword(s):  
Sovereign Debt ◽  
Balance Of Payments ◽  
The Political ◽  
Fiscal Policies ◽  
Debt Restructuring ◽  
Control Paradigm ◽  
National Autonomy ◽  
Debt Issuance ◽  
The Cost

This chapter reflects on the political imperative of establishing a coalition among eurozone countries and institutions that can achieve the economic goals listed in the previous chapter and articulates an alternative to the transfers-for-centralised-control paradigm that is driving voters to political extremes. There is one alternative which it has been claimed does not exist: greater national autonomy to pursue countercyclical fiscal policies combined with a framework for orderly sovereign debt restructuring; a eurozone fiscal framework that prioritises the collective fiscal stance; and mutualised debt issuance by a coalition of the willing. Such an alternative, if it had been pursued early in the crisis, would have addressed the balance-of-payments vulnerability of weaker euro members, reduced the cost of stagnation by requiring less austerity, and avoided the strain that the ‘no alternative’ rhetoric has inflicted on Europe's democracies.

scholarly journals Are Citizens Austerians? Evidence from Survey Experiments on Budgetary Priorities

2020 ◽  
Author(s):  
Björn Bremer ◽  
Reto Bürgisser
Keyword(s):  
Sovereign Debt ◽  
Debt Crisis ◽  
Fiscal Policies ◽  
Fiscal Consolidation ◽  
The Public ◽  
Trade Offs ◽  
European Sovereign Debt Crisis ◽  
Hard Times ◽  
The Cost ◽  
Budgetary Priorities

In the wake of the European sovereign debt crisis, governments across the continent adopted austerity. Existing research claims that fiscally conservative citizens support such fiscal policies. However, this literature largely ignores that fiscal consolidation carries substantial trade-offs. In hard times, governments have to cut spending or raise taxes to reduce government debt. We account for these budgetary trade-offs by using a split-sample and conjoint survey experiment conducted in four European countries. The results show that fiscal consolidation is not a priority for citizens: When forced to make a choice, support for reducing debt at the cost of lower spending or higher taxes is much smaller than in an unconstrained setting. Revenue-based consolidations are especially unpopular, but expenditure-based consolidations are also contested. Moreover, the public has clear budgetary priorities: People do not favor lower debt and taxes, but they support more progressive taxes to pay for higher government spending.

scholarly journals How diabolic is the sovereign-bank loop? The effects of post-default fiscal policies

2021 ◽  
pp. 1-34
Author(s):  
André Diniz ◽  
Bernardo Guimaraes
Keyword(s):  
Fiscal Policy ◽  
Government Spending ◽  
Sovereign Debt ◽  
Policy Issue ◽  
Fiscal Policies ◽  
Debt Restructuring ◽  
Balance Sheets ◽  
Lump Sum ◽  
Greek Economy ◽  
Key Policy

Abstract The deleterious effect of debt restructuring on banks’ balance sheets and, consequently, on the economy as a whole has been a key policy issue. This paper studies how post-default fiscal policy interacts with this sovereign-bank loop and shape the response of a model economy. Calibration of the model matches characteristics of the Greek economy at the time of the bond exchange. Debt restructuring in place of higher lump-sum taxation or lower nonproductive government spending harms the economy even if no other cost of default is considered. However, the sovereign-debt loop is less costly to the economy than increases in labor or capital taxes to service debt. Even so, if fiscal policy is too responsive, a crowding-out effect inhibits the recovery of capital markets, hence a more conservative fiscal stance is desirable. Thus, how diabolic the post-default sovereign-bank loop is depends to a large extent on the way fiscal policy responds.

scholarly journals Sovereign Debt Restructuring: A Model-Law Approach

2015 ◽  
Vol 6 (2) ◽  
Author(s):  
Steven L. Schwarcz
Keyword(s):  
United Nations ◽  
International Monetary Fund ◽  
Sovereign Debt ◽  
The Political ◽  
International Treaties ◽  
Debt Contracts ◽  
Debt Restructuring ◽  
Ability To Pay ◽  
Model Law ◽  
The International Monetary Fund

AbstractUnlike individuals and corporations, countries indebted beyond their ability to pay cannot use bankruptcy laws to restructure unsustainable debt. The United Nations and the International Monetary Fund have attempted to propose treaties to enable that debt restructuring, but the political difficulties of reaching a worldwide consensus have stymied their efforts. This article argues that a model-law approach to restructuring unsustainable sovereign debt should be feasible and effective because the vast majority of sovereign debt contracts are governed by the laws of either the debtor-state or two other jurisdictions. Those jurisdictions individually could enact a model law to give struggling nations a real prospect of equitably restructuring their debt to sustainable levels. By enabling such debt restructuring, that enactment would also help to foster the norms required to facilitate the development of international treaties.

The Politics of Regulatory Design in the Sovereign Debt Restructuring Regime

2019 ◽  
Vol 25 (3) ◽  
pp. 393-417 ◽  
Author(s):  
Skylar Brooks
Keyword(s):  
United States ◽  
Sovereign Debt ◽  
Institutional Design ◽  
The United States ◽  
The Other ◽  
Major Influence ◽  
The Political ◽  
Reform Initiatives ◽  
Debt Restructuring ◽  
Hard Law

Abstract This article looks at two recent initiatives aimed at improving sovereign debt restructuring processes and asks why one initiative succeeded while the other failed. It argues that the success or failure of a reform initiative in the debt restructuring regime depends primarily on the legal-institutional design of the mechanism it is advancing. Hard law mechanisms face enormous political obstacles that make their realization unlikely. Several of these obstacles have been identified by previous studies, but this article highlights additional barriers. It also shows that, in contrast to hard law arrangements, private law contracts provide politically useful mechanisms for regulating debt restructuring, especially for powerful states with major influence over reform outcomes—namely, the United States. The article also argues that the historical legacy of earlier reform initiatives matters, but mainly through its ability to further enhance or diminish the political prospects of mechanisms whose utility has already been determined by their design features.

Jurisdiction and Cognate Matters

2018 ◽  
Author(s):  
Hayk Kupelyants
Keyword(s):  
Sovereign Debt ◽  
English Court ◽  
Debt Restructuring ◽  
International Jurisdiction ◽  
Class Actions ◽  
Brussels Regulation

Chapter 3 examines the international jurisdiction in sovereign debt disputes and particularly the following matters: service of proceedings; the jurisdiction under the Brussels Regulation, the jurisdiction under English national rules; individual standing of beneficial bondholders; class actions. The chapter also examines the issue of pre-emptive strikes in sovereign debt litigation, in other words whether private creditors may initiate legal actions before the conclusion of the sovereign debt restructuring and how courts may constrain such litigation. The chapter argues that the English courts may stay proceedings if they are brought in contravention of the powers of bondholders under majority action clauses. The chapter lastly addresses the issue of whether the majority may modify the bonds after the English court has issued a judgment.

Risk Management Optimization for Sovereign Debt Restructuring

2015 ◽  
Vol 6 (2) ◽  
Author(s):  
Andrea Consiglio ◽  
Stavros A. Zenios
Keyword(s):  
Risk Management ◽  
Scenario Analysis ◽  
Sovereign Debt ◽  
Risk Measure ◽  
Policy Tools ◽  
Debt Restructuring ◽  
Tail Risk ◽  
Debt Sustainability ◽  
Scenario Optimization ◽  
Management Optimization

AbstractDebt restructuring is one of the policy tools available for resolving sovereign debt crises and, while unorthodox, it is not uncommon. We propose a scenario analysis for debt sustainability and integrate it with scenario optimization for risk management in restructuring sovereign debt. The scenario dynamics of debt-to-GDP ratio are used to define a tail risk measure, termed

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