Protection of the Poor and the Millennium Development Goals
Chapter 3: In Quest of Solutions: Sovereign Insolvency Proposals, Collective Action Clauses and Recent Country Cases
In November 2001 the IMF performed a sudden and unexpected U-turn. After nearly two decades of fiercest opposition, it suddenly advocated the very idea of sovereign insolvency that it had opposed bitterly just the day before. The new First Deputy Managing Director, Anne Krueger (2001a), joined those proposing to copy domestic insolvency laws to solve sovereign debt problems. Although the titles of Krueger’s first papers speak of a ‘new approach’ and she did initially not quote any of the many authors advocating this approach much earlier, the idea of sovereign insolvency is not new at all. Meanwhile Rogoff and Zettelmeyer (2002b) compiled a comprehensive survey on earlier publications. Arguably before Krueger, Adam Smith advocated sovereign insolvency in 1776 – the only author given academic credit by her. In 1981 an international lawyer, C.G. Oechsli, published the proposal to use corporate insolvency (Chapter 11, Title 11 of the US Code) as the analogy to renegotiate the debts of SCs. Soon after 1982 a British banker, David Suratgar, came up with this idea (cf. Raffer, 2001b; Rogoff and Zettelmeyer, 2002b). Krueger’s first speech followed several statements in favour of sovereign insolvency by the Secretary of the US Treasury, Paul O’Neill, the British Chancellor of the Exchequer, Gordon Brown, and the Canadian Finance Minister, Paul Martin. Even the IMF’s former Managing Director, Michel Camdessus, had once suggested ‘some sort of Super Chapter 11 for countries’ (Financial Times, 17 September 1998). Two employees of the Bank of England and the Bank of Canada, Andy Haldane...
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