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Project

Responsible sovereign lending and borrowing: a conceptual analysis of sovereign debt restructuring mechanisms (SDRMs) for the Eurozone.

During the European sovereign debt crisis, as from 2009, various Eurozone countries faced difficulties either to repay or refinance their outstanding debt and/or to rescue banks hit by the preceding financial crisis. Both European (including the European Stability Mechanism (ESM) and the European Central Bank (ECB)) and international institutions (the International Monetary Fund (IMF)) had to step in to bail-out countries including Greece, Ireland & Portugal and avoid sovereign default. Our research focusses on regulatory initiatives with regard to "responsible sovereign lending & borrowing", a well-known concept in the context of household debt that yet received relatively little academic attention with regard to sovereign debt. After 1) investigating the rationale for regulation (the "why" of regulation), based amongst others on a (behavioural) law analysis (e.g. taking into account existing market failures) and a comparison with lender/borrower liability rules applicable to household & commercial credit, as well as 2) the various regulatory options (the "how"), we focus in particular on proposals for sovereign debt restructuring mechanisms (so called "SDRMs"). SDRMs (e.g. automatic write-downs/maturity extensions of sovereign debt) could for instance enter into force in case a Eurozone country applies for a bail-out with the ESM. Considered as "one of the preconditions for a stronger Banking Union" , SDRMs prove highly controversial on the EU political level.
Date:1 Oct 2019 →  30 Sep 2023
Keywords:EUROPEAN COMMUNITY LAW
Disciplines:Economic, commercial and financial law, European law