Thinking the Unthinkable: Lessons of Past Sovereign Debt Restructurings

The Lisbon Council launches Thinking the Unthinkable: Lessons of Past Sovereign Debt Restructurings, a new e-brief by Alessandro Leipold, chief economist of the Lisbon Council and former acting director of the European Department at the International Monetary Fund (IMF). Drawing on his decades of experience at the centre of financial crisis prevention and management, Mr. Leipold argues that European debt resolution requires a much more forward-leaning, information-driven approach, involving supplying markets with better, more timely information (including tougher banking stress tests), abandoning untenable timelines (such as the “no-restructurings-before-2013” mantra), and staying ahead of the game via recourse to tools such as pre-emptive bond exchange offers, which were successfully deployed by Pakistan, Ukraine, Uruguay and the Dominican Republic in the last bout of severe debt crises of the early 2000s. He draws five key lessons from past sovereign debt restructurings.