Chapter 14: Who is the cheapest-cost avoider in the sovereign debt market? Restating the case for the SDRM and greater restraint in IMF lending1
Curzio Giannini INTRODUCTION The debate on the international ﬁnancial architecture, if we take the Mexican crisis of 1994–95 as its starting point, has now been going on for almost a decade. While a sense of fatigue is inevitable in the circumstances, outright skepticism would be misplaced. Institutional reform is a complex process. At the international level, the process gets even more complex, due to both the greater number and diversity of actors, and the comparatively underdeveloped institutional environment. Yet, successful institutional reform is not a novelty at the international level. The long-standing realist claim that international cooperation is but a cover for power struggle has long been disproved. Two prominent examples suﬃce to make the case. Before the Second World War no one predicted that the major countries would ever agree on a formal treaty enshrining fairly precise rules of the game for their monetary relations. Yet, not only was the Bretton Woods Treaty negotiated but it can post factum also be considered to have been an astounding success, since the post-war era has been the longest period of high growth and monetary stability that the West has ever known. In Europe, in the same vein, many predicted as late as the early 1990s that the project to decouple monetary union from political union would never take oﬀ. But ﬁat powers, we have learned, can also be shared, when countries perceive it is in their best interest to do so. As a result, we now have the euro,...
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