The international debate about ways to prevent and mitigate international debt crises will likely come to a head next month when senior government officials from throughout the world gather in Washington DC for the spring meetings of the International Monetary Fund (IMF) and the World Bank.
At the centre of the debate are competing proposals from the IMF – which champions an ambitious, quasi-bankruptcy mechanism to allow countries to restructure their sovereign debt – and the US, which favours, at least as a first step, including majority action clauses in all sovereign debt contracts. Majority action clauses would allow a super majority (75%) of bondholders to make decisions regardless of the objections of the remaining bondholders. Commercial banks and other lenders are firmly opposed to the IMF proposal but may be warming to the US proposal of majority action clauses.
