How to stave off

The Pak Banker - - OPINION -

With sov­er­eign debt prob­lems tak­ing centrestage, the need of the hour is to fill a long­stand­ing gap in the in­ter­na­tional eco­nomic ar­chi­tec­ture A string of un­re­lated de­vel­op­ments last week brought the fes­ter­ing sov­er­eign debt prob­lems to the global centrestage. Greece clinched a third bailout pack­age worth €86 bil­lion on Fri­day, af­ter wrench­ing ne­go­ti­a­tions with the Euro­pean Com­mis­sion, the Euro­pean Cen­tral Bank and the In­ter­na­tional Mon­e­tary Fund. But the cred­i­tors, par­tic­u­larly Ger­many and Fin­land, have fiercely op­posed any im­me­di­ate debt re­lief for Greece on its to­tal debt, now close to €400 bil­lion. The day be­fore, protesters demon­strated out­side the Man­hat­tan of­fices of hedge fund Paul­son and Co., which con­trols a large stake in Puerto Rico's debt of $72 bil­lion and which for­mer IMF chief economist Anne Kruger has called un­payable. "Greece chose to join the euro zone; Puerto Rico never chose to be­come an un­in­cor­po­rated US ter­ri­tory... The US must take re­spon­si­bil­ity for its im­pe­ri­al­ist past and neo­colo­nial present," say Joe Stiglitz, a No­bel lau­re­ate in eco­nom­ics, and Mark Medish, a for­mer US trea­sury of­fi­cial, in an ar­ti­cle pub­lished in The Wall Street Jour­nal on 13 Au­gust.

Last year, a New York judge hit the head­lines by rul­ing in favour of a group of "vul­ture funds" in their case against the Ar­gen­tinian gov­ern­ment. Hav­ing bought a tiny per­cent­age of dis­tressed Ar­gen­tinian bonds on the sec­ondary mar­ket at a frac­tion of their face value, these funds had re­fused to par­tic­i­pate in the debt restruc­tur­ing that Ar­gentina had con­cluded with more than 90% of its cred­i­tors, and in­stead were hold­ing out for full pay­ment. The

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