New @Eurodad report co-authored with @GPustovit develops, yet another, proposal for a sovereign debt standstill mechanism: eurodad.org/Entries/view/1… @MattHGoldmann @AGelpern @KatharinaPistor @KevinPGallagher @upanizza @GeneralTheorist @GrundSebastian @RobinWigg @alonsosotoj (1/n)
The proposal for an IMF legally binding debt standstill is not new by any means. It has just lay dormant for a couple of decades since the last time the IMF Executive Board discussed it (first in the 80s and last time in 1996). (2/n)
What is it? Under Article VIII, Section 2 (b) allows the imposition of a debt standstill through the temporary suspension of enforceability of debt contracts in domestic courts of more than 189 IMF member countries, including the US and the UK (3/n)
How can it be used? In order for the debt standstill under Article VIII to become operational, the IMF Executive Board must issue an authoritative interpretation under Article XXIX of the AoA and Decision 446-4 (1949).
Who can use it? Any IMF member can request a standstill under the provisions of Article VIII. During the standstill, the creditor claims become unenforceable in court. (5/n)
This creates incentives and provides time for creditors and debtors to negotiate in good faith to find a solution representing the best collective interest (6/n)
If its so powerful, why hasn’t it been use before? Precisely for this reason. In the 1980s, the IMF staff and legal counsel made a concrete proposal for this interpretation. Opposition by creditor countries in the Board, led for the initiative to be shelved (7/n)
However, the scale of the Covid-19 crisis has made it clear that the time has come for Article VIII. Best of all, debtor coutnries can take the lead in the discussion and implementation. More details in the report! (8/8)
