Resolving Sovereign Debt Crises within a Framework of Justice

By Ann Pettifor

The Financial Times reports today that in the light of “messy” negotiations around Argentina’s debt, calls have been revived for a bankruptcy regime for nations. For many years I have worked closely with Professor Kunibert Raffer of the University of Vienna, to promote just such a regime: the ‘Raffer Proposal’ - a fair and just framework for the resolution of sovereign debt crises. This is what we called for in the journal of the Carnegie Council for Ethics in International Affairs, back in September, 2003.

Unlike the IMF’s proposal of 2001 for a Sovereign Debt Restructuring Mechanism (SDRM), our Framework for resolving sovereign debt crises is based on a proposal, originally developed by Professor Raffer, modelled on Chapter 9 of the U.S. legal code. Chapter 9 regulates the bankruptcy of municipal and governmental organizations, as against Chapter 11 which deals with corporate bankruptcies. The particular attraction of the Chapter 9 model is its protection of taxpayer and employee interests in the resolution of municipal and other governmental debt crises. For more on our sovereign insolvency framework see here:

http://www.carnegiecouncil.org/publications/journal/17_2/roundtable/1023.html