How to stave off
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