Please find attached a hell of a weekend read. This recently published IMF study on "Sovereign Debt Restructurings 1950–2010:
Literature Survey, Data, and Stylized Facts
" has been developed with great effort (and surely cost a lot of $$$ to put together) in order to give important insights into how efficient IMF supervised sovereign debt restructuring has been between 1950 and 2010. 447 sovereign debt restructurings in 88 countries have been surveyed.
The paper further concludes the following:
1) "Debt restructurings can have drastic adverse consequences for economic growth, trade, capital flows, banks and other financial institutions"
2) "A debt restructuring should therefore only be initiated if, on the basis of a debt sustainability analysis, it is concluded that a macro-economic adjustment program cannot realistically restore sustainability."
3) "The scope of debt relief should be proportional to the country’s debt sustainability problem."
4) "Overall, the system of ad-hoc debt exchanges seems to have worked reasonably well for emerging market countries. These experiences may also prove useful to any distressed country, including advanced economies.
5) Under "F. Pitfalls in the Restructuring Process" the study concludes that by far not all IMF supervised restructuring efforts have been a success and even "managed" efforts can turn into desasters.
Quote: "Elections, wars and conflicts, widespread riots and general strikes, or the resignation of key government members can all cause delays in implementing a debt restructuring. In other cases, restructurings failed because governments unilaterally cancelled agreements that had
been signed by the previous party in power. In addition, IMF programs can go off-track...A last important factor for the failure or success of a debt exchange is the size of haircuts."
If you ask me the last paragraph somehow reads like today's Greece
Riots & strike: http://www.telegraph.co.uk/finance/debt ... -2012.html
Government turmoil: http://www.bbc.co.uk/news/world-europe-18082552
Gone wrong haircut: http://www.spiegel.de/international/eur ... 57146.html
Seems we are on a good way with the IMF's help to restructure international sovereign debts.
For further details read here: http://www.imf.org/external/pubs/ft/wp/2012/wp12203.pdf
Have a good weekend everyone!