The Root of All Sovereign Debt Crises

And the evidence confirms that the euro crisis is not really about sovereign debt, but about foreign debt.

Otherwise, China might already have experienced its own localized sovereign debt crisis and, perhaps, hyper inflation.

But the proposition that the ongoing sovereign debt crisis on Europe s periphery is a reason to appoint a European is wrong.

Of course, I am confident that the eurozone s ongoing sovereign debt crisis will be overcome, and that a more integrated and effective Europe will emerge.

NEW HAVEN It might not seem that Europe s sovereign debt crisis and growing concern about the United States debt position should shake basic economic confidence.

In the case of sovereign debt, however, there is no binding international law that permits bankruptcy.

Virtually every emerging market country has experienced recurrent sovereign debt problems.

NEW YORK When Greece s sovereign debt crisis threatened the euro s survival, US officials called their European counterparts to express bewilderment at their inability to resolve the issue.

Currently, they are wrestling with widening sovereign debt problems and high unemployment.

Much is being made of high levels of sovereign debt on both sides of the Atlantic, and in Japan.

But, this time, the default has been triggered by a significant shift in the international sovereign debt regime.

A public debt crisis in Japan (as the combination of recession, deflation, and high deficits drove up the debt GDP ratio).

With the onset of the European sovereign debt crisis in 2010, banks appetite for public debt fell again.

Indeed, by putting a floor on the price of sovereign debt and any accompanying inflation, central bank intervention would reduce the real value of the debt and facilitate repayment.

The economists Carmen Reinhart and Kenneth Rogoff have studied centuries of sovereign debt crises, and remind us that today s developed world has a forgotten history of sovereign default.

These countries do not have the excessive budget deficits that many European countries ran up during the last expansion and that are culminating in today s mismanaged sovereign debt crisis.

NEW YORK A recent decision by a United States appeals court threatens to upend global sovereign debt markets.

After the Argentine crisis, President George W. Bush s administration vetoed proposals to create a mechanism for sovereign debt restructuring.

Ministers are too busy recovering from their trauma to think about paying fat fees for big new international bond issues.

Who wants to build up debt if there might be a financial crisis around the corner?

Critics have complained that it would reduce liquidity in important markets, such as those for non US sovereign debt.

Indeed, Italy boasted the lowest deficit to GDP ratio in the eurozone, and the Italian government had no problem refinancing at attractive interest rates.

And the US is clearly not alone in its malaise, with the eurozone fighting a far more urgent sovereign debt crisis.

Nonetheless, Argentina s latest debt trauma shows that the global system for sovereign debt workouts remains badly in need of repair.

Investors were not worried about default risk on Spanish or Irish sovereign debt, or about Italy s chronically large sovereign debt.

WASHINGTON, DC The eurozone crisis unfolded primarily as a sovereign debt crisis mostly on its southern periphery, with interest rates on sovereign bonds at times reaching 6 7 for Italy and Spain, and even higher for other countries.

One would need a sophisticated capability for monitoring and enforcing fiscal policy and sovereign debt or else end up with a repeat of the current situation.

BERKELEY Fiscal profligacy did not cause the sovereign debt crisis engulfing Europe, and fiscal austerity will not solve it.

Bolivia s 1988 buyback of close to half of its defaulted sovereign debt, an operation funded by international donors, is a classic example.

But, to get to that improved Europe, not only must the sovereign debt crisis be resolved relations with three major countries to Europe s east Turkey, Russia, and Ukraine will need to be put on more secure footing.

It was only this year, when financial markets started to worry about the accumulation of sovereign debt, that interest rate differentials began to widen.

Investors subsequent efforts to price in the risk of a eurozone breakup not the volume of sovereign debt caused bond yields to spike.

This also implies that Eurobonds will never constitute the silver bullet that some had hoped would solve Europe s sovereign debt crisis.

Regardless of how the current impasse is resolved, the ruling raises many questions for issuers and holders of sovereign debt.

And, because eurozone banks hold a substantial part of their assets in the form of eurozone sovereign bonds, the sovereign debt crisis became a potential banking crisis, worsened by banks other losses, owing, for example, to the collapse of housing prices in Spain.

As long as this internal divergence persists, the euro crisis cannot be fully resolved, because current account deficits and or slow growth will continue to stalk the southern European countries, perpetuating worries about sovereign debt and commercial banks.

The European Central Bank s announcement of its outright market transactions program has reduced the risk of a sovereign debt crisis in the eurozone periphery and a breakup of the monetary union.

As a result of Chile s cautious fiscal strategy, the country has a national debt that amounts to only 16 of GDP and a sovereign debt rating that is the highest in South America.

But the ongoing legal saga of Argentina s fight with holdout creditors shows that the international system for orderly sovereign debt restructuring may be broken.

BERKELEY Fiscal profligacy did not cause the sovereign debt crisis engulfing Europe, and fiscal austerity will not solve it.

Lee Buchheit, a leading sovereign debt attorney and the man who managed the eventual Greek debt restructuring in 2012, was harshly critical of the authorities failure to face up to reality.

For now, low world interest rates are restraining debt service costs, but debt levels can be reduced only very gradually over long periods, whereas real (inflation adjusted) interest rates can rise far more quickly, even for rich countries. Debt crises tend to come out of the blue, hitting countries whose debt trajectories simply have no room for error or unplanned adversity.

Debt crises tend to come out of the blue, hitting countries whose debt trajectories simply have no room for error or unplanned adversity.

In the aftermath of the global financial crisis, the United Nations Commission of Experts on Reforms of the International Monetary and Financial System urged that we design an efficient and fair system for the restructuring of sovereign debt.