Sovereign default and the rules of engineering Ugo Panizza, 2 March 2013

Ugo Panizza

Professor of international economics and Pictet Chair in Finance and Development at the Graduate Institute, Geneva.

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Sovereign default and the rules of engineering

Ugo Panizza, 2 March 2013

Policymakers charged with sovereign debt restructuring would do well to take an engineer’s approach: know what’s broken, and know exactly what your solution aims to fix. This column argues that Europe may yet face several complex sovereign defaults and, like engineers, in dealing with these defaults we must find a way to avoid characteristically panicked policymaking.

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The ongoing European crisis and the recent ruling (see, for example, Gelpern 2012) of the United States Court of Appeals for the Second Circuit in NML Capital Ltd. versus Republic of Argentina reignited the debate on sovereign debt restructuring. This post uses the rules of engineering to make the case for the creation of a structured mechanism for managing sovereign debt crises (for more details, see Panizza 2013).

http://www.voxeu.org/article/sovereign-default-and-rules-engineering