Monday, September 07, 2015

Appeal from 19 leading economists for better world rules on sovereign debt

Nineteen economists, including four of my favorites (Heiner Flassbeck, Jamie Galbraith, Thomas Piketty and Yanis Varoufakis) have signed a letter encouraging European countries to support Argentina's proposal backed by a solid majority in the UN General Assembly to establish reasonable international rules of sovereign debt (European countries must support the United Nations’ proposals for sovereign debt restructuring! – Open letter to the UN by 19 economists Yanis Varoufakis blog 09/08/2015):

The Greek crisis has made clear that individual states acting alone cannot negotiate reasonable conditions for the restructuring of their debt within the current political framework, even though these debts are often unsustainable over the long term. Throughout its negotiations with creditor institutions, Greece faced a stubborn refusal to consider any debt restructuring, even though this refusal stood in contradiction to the IMF’s own recommendations.

At the UN in New York exactly one year ago, Argentina, with the support of the 134 countries of the G77, proposed creating a committee aimed at establishing an international legal framework for the restructuring of sovereign debts. This committee, backed up by experts of the UNCTAD, today submits to vote nine principles that should be respected when restructuring sovereign debt: sovereignty, good faith, transparency, impartiality, equitable treatment, sovereign immunity, legitimacy, sustainability and majority restructuring.
They recognize that Cristina Fernández' government in Argentina has been a leader on this issue:

Argentina, standing at the forefront of these efforts, has been fending off “vulture funds” ever since it restructured its debt. These funds recently succeeded in freezing Argentina’s assets in the United States through the intervention of the American courts.

Yesterday Argentina, today Greece, and tomorrow perhaps France as well: any indebted country can be blocked from restructuring its debt in spite of all common sense. Establishing a legal framework for debt restructuring, allowing each state to solve its debt problems without risking financial collapse or the loss of its sovereignty, is a matter of great urgency in promoting financial stability. [my emphasis]

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