Wall Street Journal
November 27, 2013
Bruised by the traumatic experience of Greece's two bailouts, International Monetary Fund officials floated a proposal in April that insisted distressed countries' excessive debts be restructured before a bailout is granted, putting more of the burden on private-sector creditors.
In a riposte published this week, a group of leading authorities on sovereign debt claimed the idea goes too far.
The experts—including lawyer Lee Buchheit, academic Mitu Gulati and former IMF Deputy Managing Director Anne Krueger —advocate gentler treatment of private-sector creditors.
They argue that existing debtholders should be compelled to extend debt maturities by three to five years, to buy time for the country receiving a bailout.
Government debt has tied the fates of countries and banks in the euro zone since the onset of the bloc's debt crisis. Greece's debt restructuring, the largest ever for a sovereign state, was delayed for two years to the spring of 2012 because euro-zone banks weren't ready to absorb the losses it involved any earlier—as the IMF admitted in a postmortem it published in June on the first Greek bailout.
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