Chapters (Layout Features)

Creating a Framework for Sovereign Debt Restructuring that Works

Guzman, Martin; Stiglitz, Joseph E.

Recent controversies surrounding sovereign debt restructurings show the weaknesses of the current market-based system in achieving efficient and fair solutions to sovereign debt crises. This article reviews the existing problems and proposes solutions. It argues that improvements in the language of contracts, although beneficial, cannot provide a comprehensive, efficient, and equitable solution to the problems faced in restructurings–but there are improvements within the contractual approach that should be implemented. Ultimately, the contractual approach must be complemented by a multinational legal framework that facilitates restructurings based on principles of efficiency and equity. Given the current geopolitical constraints, in the short-run we advocate the implementation of a “soft law” approach, built on the recognition of the limitations of the private contractual approach and on a set of principles – most importantly, the restoration of sovereign immunity – over which there may be consensus. We suggest that in a context of political economy tensions it should be impossible for a government to sign away the sovereign immunity either for itself or successor governments. The framework could be implemented through the United Nations, or it could prompt the creation of a new institution.


  • thumnail for CreatingaFrameworkforSovereignDebtRestructuring_0.pdf CreatingaFrameworkforSovereignDebtRestructuring_0.pdf application/pdf 4.44 MB Download File

Also Published In

Too Little, Too Late: The Quest to Resolve Sovereign Debt Crisis
Columbia University Press

More About This Work

Academic Units
Published Here
April 15, 2019


Also presented at the United Nations General Assembly Ad Hoc Committee on Sovereign Debt Restructuring Processes, July 2015.