Arguments against a Sovereign Debt Workout Mechanism

In most countries, if a person or a company is not able to repay its debt, national insolvency laws settle how much the creditors are entitled to. If necessary, the court decides this question – the judge of course has to be impartial. This is not only fair to everyone involved, it is also highly efficient. Without such laws, our modern economy that is based on lending and borrowing could hardly function.

It therefore seems obvious that a similar procedure could settle sovereign debt crises fairer and more efficient than the current system where creditors decide on their own behalf. Nevertheless, there are many arguments raised against a Sovereign Debt Workout Mechanism as proposed by Jubilee Germany and many others.

The paper “Arguments against a Sovereign Debt Workout Mechanism” confronts those arguments – some seem plausible at first sight, others not so much.

Download: Arguments against a Sovereign Debt Workout Mechanism