The World Economy in Crisis The Return of Keynesianism? 30 – 31 October 2009 13th Conference of the Research Network Macroeconomics and Macroeconomic Policies (RNM) How to Prevent and Solve a Classic Sovereign Debt Crisis: Beyond the debate CAC vs. SRDM. Claire Barraud∗, University of Grenoble, France. Abstract: The International Lender of Last Resort (ILLR), in the IMF’s body, and the Sovereign Debt Restructuring Mechanism (SDRM) of Anne Krueger have been given up, despite the seniority of the former and the successful design of the latter. Instead, the Collective Action Clauses (CACs) have been chosen as the only way to settle a sovereign debt crisis, in spite of their weakness to only govern restructurings. The purpose of a sovereign debt crisis settlement is not to reach a restructuring agreement only respecting creditors’ rights, but to find an outcome to the crisis satisfying creditors’ rights and the rehabilitation of the sovereign debtor. Globally, a classic sovereign debt crisis has multiple ins and outs and merits so a global and hybrid mechanism designed step by step, according to existing proposals. Instead of an ILLR, an International Lender of First Resort (ILFR) could distinguish among possible natures and causes of the crisis to bring settlement around the right process. Then only, in case of solvency crisis, CACs could be privileged. But lastly, if CACs fail to reach a reasonable agreement, an arbitration forum, as the one of the SDRM, would be in charge of forcing a decision satisfying all involved parties. ∗Graduate Student.
[email protected]. 1. Introduction. Sovereign defaults do exist since sovereign have right to borrow.