Triple Crisis Blogger Kevin P. Gallagher originally published this article in The Guardian, showing how sovereign debt restructuring in Greece and beyond could get snared in trade and investment treaties.
What happens when a country goes broke? Ask Argentina: bondholders sue under trade agreements. We need a fairer system.
Greece may have managed to kick the can down the road once again, but will eventually have to restructure its debt. If Greece or any other nation restructures, they will find that one of the most glaring gaps in global economic governance is the lack of an agreed-upon regime for resolving debt crises. New research shows that in the absence of conscious global economic governance, we may be left with a de facto regime: the thousands of international trade and investment treaties that have jurisdiction over government debt. Just ask Argentina.
A number of commentators have pointed to Argentina’s “success” after its bond restructuring as a lesson for Greece. Indeed, Argentina has experienced impressive growth alongside debt restructuring. But asothers have pointed out, the two cases are not all that comparable. One additional reason for Argentina’s swift recovery is due to the fact that Argentina devalued its currency, which Greece cannot do under the euro. It is also true that Argentina happened to be endowed with key primary products in the middle of a commodity boom. Greece is not so lucky.