Knowledge@ASB: Sovereign Debt: Bring on the Bankruptcy Regime

It seems the time has arrived for the idea of sovereign bankruptcy. Globalisation is making international financial crises far more frequent and severe. And, as the world faces the GSC – the global sovereign crisis – a new approach is required, argues Ross Buckley, professor of international finance at the University of New South Wales. An international bankruptcy forum would bring together bankers and debtors to reach agreements to help defaulting countries and potentially eliminate their need for drastic austerity measures. In the interim, indebted countries could continue trading and try to clean up their acts. The upshot would be a speedier resolution of debt crises, delivery of more humane outcomes and the constraint of reckless borrowing and lending. So is it time for the International Monetary Fund to move over?