SOVEREIGN DEBTORS IN DISTRESS ARE OUR INSTITUTIONS UP TO THE CHALLENGE? CIGI-INET Conference Waterloo, ON— February 24–26, 2012
Program
As of February 16, 2012
SoveReign Debtors in Distress:
Are Our Institutions Up to the Challenge?
CIGI-INET Conference Waterloo, ON— February 24–26, 2012
Program
As of February 16, 2012
Copyright Š 2012 by The Centre for International Governance Innovation and the Institute for New Economic Thinking. The opinions expressed in this publication are those of the author and do not necessarily reflect the views of The Centre for International Governance Innovation or its Board of Directors or Board of Governors.
This work was carried out with the support of The Centre for International Governance Innovation (CIGI), Waterloo, Ontario, Canada (www.cigionline. org) and the Institute for New Economic Thinking (www.ineteconomics.org). This work is licensed under a Creative Commons Attribution-Noncommercial — No Derivatives Licence. To view this licence, visit (www.creativecommons.org/licenses/ by-nc-nd/3.0/). For re-use or distribution, please include this copyright notice.
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SOVEREIGN DEBTORS IN DISTRESS ARE OUR INSTITUTIONS UP TO THE CHALLENGE?
Table of Contents 4
Letter from the CIGI Executive Director
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Letter from the INET Executive Director
6 Agenda 6
Friday, February 24, 2012
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Saturday, February 25, 2012
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Sunday, February 26, 2012
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Privacy Note
10 Participant Biographies 26 Preparatory Document for Participants 26 Scoping the Current Risks of Sovereign Debt Crises 26 Managing and Resolving Crises — Have We Got It Right? 27 A Comment on the History 29 Where Are We Now? 29 Conference Objectives
31 Conference Committee 32 Frequently Asked Questions 34 About CIGI 34 About INET 35 CIGI Masthead
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Letter from the CIGI Executive Director In January 2011, The Centre for International Governance Innovation (CIGI) and the Institute for New Economic Thinking (INET) announced a long-term partnership to create the CIGI-INET program on new economic theory, practice and governance. This exciting new collaboration will advance research on issues of critical importance to economics and international governance. This conference, “Sovereign Debtors in Distress: Are Our Institutions Up to the Challenge?” marks the first joint CIGI-INET annual conference to be held in Canada. In this context, we are gathering leading experts and policy makers from around the world to address the question, “Are our institutions up to the challenge of efficiently managing and resolving debt crisis?” I would like to welcome you to CIGI and the conference. In Europe today, we are again witnessing the possibility of a sovereign default. Even after years of debate, many proposals for reform, and some actions, enormous uncertainty is still the norm when a sovereign reaches the point where debt restructuring is widely seen as inevitable or perhaps even desirable. The issues at stake — how to avoid moral hazard for debtors and creditors, respect democratic processes, protect bondholder rights and support global stability — present difficult choices, but ones that the world has failed to adequately address as the immediacy of previous crises faded. The conference will be an opportunity to take a fresh look at the global legal and institutional frameworks and discuss whether they are adequate for the immediate and longer-term challenges. Again, welcome to CIGI and thank you for your participation in our conference. I am looking forward to the debates and ideas stemming from this important meeting. Sincerely,
Thomas A. Bernes Executive Director
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SOVEREIGN DEBTORS IN DISTRESS ARE OUR INSTITUTIONS UP TO THE CHALLENGE?
Letter from the INET Executive Director The “Sovereign Debtors in Distress: Are Our Institutions Up to the Challenge?” meeting is the first annual conference in Canada INET has co-hosted with The Centre for International Governance Innovation. The Institute for New Economic Thinking is proud to move forward in our long-term partnership with CIGI. INET sees this partnership and this program as essential parts of its efforts to build capacity in Canada and to get the economics profession to address realworld challenges through nurturing and developing new economic thinking. In Europe, as well as the United States, political gridlock and unsustainable debt burdens have led to a situation that is untenable and, using solely “creditor logic,” exacerbates inequality and social instability. Difficult choices are ahead. These choices have traditionally been made to favour the creditors as large complex financial institutions are politically powerful and they are so intertwined that they structurally threaten to break down our economies if their imperatives are not heeded. Well-intentioned policy makers are being held hostage by financial structure. That must change if trust in governance is to be restored. It is our hope that at this gathering we will move beyond the simplistic rhetoric of the old economic orthodoxy that is unmindful of the larger social consequences debt overhangs. I look forward to speaking with many of you this weekend and witnessing the many important discussions that will occur here. We are grateful that you have joined us to rise to this challenge. Sincerely,
Robert A. Johnson Executive Director
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Agenda Agenda as of February 16, 2012. Subject to change. All sessions will take place at CIGI, 57 Erb Street West, Waterloo, Ontario. Dinners and receptions will take place at Langdon Hall, Cambridge, Ontario. Shuttle service will be provided.
Friday, February 24, 2012 Langdon Hall, Cambridge, Ontario Carolinian Room 18:30 Registration and Reception Orchard Room 19:00 Dinner and Keynote Address Paul Martin, Former Prime Minister of Canada
Saturday, February 25, 2012 CIGI Atrium, Waterloo, Ontario 9:00 Conference Welcome Thomas A. Bernes, Executive Director, CIGI Robert Johnson, Executive Director, INET Session 1: Sovereign Debt Excesses: Current Vulnerabilities in Historical Perspective • Heat map of current sovereign debtors • What does history tell us about levels/composition of debt and sustainability? • How do markets behave in the run-up to debt crises: then and now? Chair: Gordon Thiessen, Former Governor, Bank of Canada Panel: 1. Michael Bordo, Professor of Economics, Rutgers University 2. Carlo Cottarelli, Fiscal Affairs Department, International Monetary Fund 3. Jeffrey Frankel, Professor, Harvard University 10:30 Break
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SOVEREIGN DEBTORS IN DISTRESS ARE OUR INSTITUTIONS UP TO THE CHALLENGE?
10:45 Session 2: Experiences with Restructuring, Rescheduling and Default • Pre-war restructuring • Restructuring in the bank-credit dominated 1980s • Restructuring in fiscal crises and banking crises: is there a difference? • Messy defaults (Argentina) • Costs and benefits of delaying restructuring Chair: Sean Hagan, General Counsel and Director of the Legal Department, International Monetary Fund Panel: 1. Martin Gilman, Professor, Moscow Higher School of Economics 2. Daniel Marx, Executive Director, Quantum Finanzas 3. Andrés Velasco, Former Finance Minister of Chile Seagram Room, CIGI 12:30 LUNCH 14:00 Session 3: The IMF and severely indebted sovereigns: does The IMF smooth the path toward or hinder resolution? • Has the IMF played an optimal role when countries ultimately restructure? • Does the IMF have the right tools? Chair: Jack Boorman, International Monetary Fund (retired) Panel: 1. Lewis Alexander, Managing Director, Nomura 2. Donal Donovan, Former Deputy Director, International Monetary Fund 3. Sean Hagan, General Counsel and Director of the Legal Department, International Monetary Fund 15:30 BREAK
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15:45 Session 4: the european debt crisis: what have we learned about handling sovereign debt crises? • Proposals for orderly restructuring mechanisms in Europe • The new lexicon of restructuring (re-profiling, voluntary distressed extension); new policy instruments for restructuring in Europe? • Is Europe an entrée to a vigorous and conclusive global debate? Chair: Anatole Kaletsky, Editor-At-Large, The Times Panel: 1. Sony Kapoor, Managing Director, Re-define 2. Jean Pisani-Ferry, Director, Bruegel 3. Jürgen Stark, Former Member of the Executive Board of the European Central Bank 17:30 Shuttle Departs From CIGI to Langdon Hall Langdon Hall, Cambridge, Ontario Carolinian Room 19:00 Reception Orchard Room 19:30 Dinner and Keynote Address George Soros, Chairman, Soros Fund Management
Sunday, February 26, 2012 CIGI Atrium 9:00 Session 5: Do we need institutional reform to facilitate orderly debt restructuring? • What would be the objectives, costs and unintended consequences? • Aren’t CACs enough? • Why have previous initiatives failed? Chair: James Haley, Director, Global Economy Program, CIGI Panel: 1. Francois Gianviti, Consultant, International Monetary Fund 2. Richard Gitlin, President, Gitlin & Company, LLC 3. Federico Sturzenegger, President, Banco Ciudad de Buenos Aires 8
SOVEREIGN DEBTORS IN DISTRESS ARE OUR INSTITUTIONS UP TO THE CHALLENGE?
10:30 BREAK 10:45 Session 6: Round Table Discussion: A road map for reform Chair: Paul Jenkins, Distinguished Fellow, CIGI Panel: 1. Leszek Balcerowicz, Professor, Warsaw School of Economics 2. Jean Pisani-Ferry, Director, Bruegel 3. Susan Schadler, Senior Visiting Fellow, CIGI 12:30 CLOSING REMARKS Thomas A. Bernes, Executive Director, CIGI Seagram Room, CIGI 12:45 Buffet Lunch
Privacy Note All conference sessions, including lunches and dinners, are Chatham House Rule. Participants are free to use the information received, but neither the identity nor the affiliation of the speaker(s), nor that of any other participant, may be revealed without consent; please respect these conditions in the use of social media such as Twitter. CIGI-INET will be photographing parts of the conference for its records and use in promotional materials. CIGI-INET will be video recording the entire event and seeking consent from speakers to post their segment online. Videos will be edited (as necessary) to feature only those speakers who have signed consent forms.
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Participant Biographies Lewis Alexander, Chief US Economist, Nomura Lewis Alexander leads Nomura’s economic research team covering the US economy as the chief US economist. From 2009 until earlier this year, he served as a counselor to US Secretary of the Treasury Timothy Geithner, working on a range of domestic financial issues. He also led the initial effort to establish the Treasury’s new Office of Financial Research. From 1999 to 2009, Mr. Alexander worked for Citigroup, first as the head of emerging market economics and later as Citi’s chief economist. Before joining Citigroup, he worked for 10 years in the Division of International Finance of the Federal Reserve Board, lastly as deputy director. From 1993 to 1996, he also served as chief economist of the US Department of Commerce. He has a Ph.D. in economics from Yale University. Leszek Balcerowicz, Professor, Warsaw School of Economics Leszek Balcerowicz is former deputy prime minister of Poland and minister of finance and former president of the National Bank of Poland. Mr. Balcerowicz is the architect of Poland’s economic reforms initiated in 1989; he has been at the centre of Poland’s economic and political life since the fall of communism in Poland in 1989. He graduated with distinction from the Foreign Trade Faculty at the Central School of Planning and Statistics (CSPS) in Warsaw (now Warsaw School of Economics) in 1970. In 1974, he gained an M.B.A. at St. John’s University in New York; in 1975 he received his Ph.D. in economics at the CSPS in Warsaw. Since October 1992, he has been a professor and the head of the department of International Comparative Studies at the Warsaw School of Economics. Jim Balsillie, Retired Founder and Co-CEO of RIM/ BlackBerry; Current Chair of the Board, CIGI and CIC From 1992 until 2012, Jim Balsillie was co-CEO at Research In Motion (RIM), maker of the world-renowned BlackBerry wireless solution. In 2001, Mr. Balsillie founded The Centre for International Governance Innovation (CIGI), a worldclass global research institute focused on the restructuring of international governance. In 2007, Mr. Balsillie announced the creation of the new Canadian International Council (CIC) of which he is the chair. In 2008, he founded the Balsillie School of International Affairs. Mr. Balsillie has been listed on TIME Magazine’s list of Most Influential People and is also the sole private sector member of the UN High-Level Panel on Global Sustainability. Mr. Balsillie is a graduate of the University of Toronto and the Harvard Graduate School of Business. He is a fellow of the Ontario Institute of Chartered Accountants and holds numerous honorary doctorate degrees.
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SOVEREIGN DEBTORS IN DISTRESS ARE OUR INSTITUTIONS UP TO THE CHALLENGE?
William Geoffrey Beattie, President and CEO, The Woodbridge Company Limited William Geoffrey Beattie graduated from the University of Western Ontario in 1984 with a J.D. Mr. Beattie began his career at Tory Tory DesLauriers & Binnington as an articling student in 1985, and practised corporate law until 1987 when he joined Wood Gundy Inc. as vice president, investment banking (1987–1990). He rejoined Tory Tory DesLauriers & Binnington in 1990, working in corporate and securities law, with an emphasis on merchant banking and private equity investments. Mr. Beattie made partner in 1993, and held this position until he joined Woodbridge in 1998. Currently, he is the deputy chairman of Thomson Reuters. He is a director of the Royal Bank of Canada, General Electric and Maple Leaf Foods Inc. Mr. Beattie is chairman of the risk committee of General Electric and chairman of the risk committee of the Royal Bank of Canada. He is a member of the dean’s advisory board of the Joseph L. Rotman School of Management at the University of Toronto. He is also a trustee of the University Health Network, and he is currently serving as campaign chair for the University of Western Ontario. Stephanie Ben-Ishai, Professor, Osgoode Hall Law School Stephanie Ben-Ishai, a tenured professor at Osgoode Hall Law School, is an internationally recognized expert on insolvency, corporate governance and commercial law. A frequent guest speaker, she has presented her work around the world. She is the author or co-author/co-editor of four books on insolvency and contract law and over 25 articles on insolvency, commercial and corporate law. She is also an affiliated scholar with Davies Ward Phillips & Vineberg LLP, where she has provided advice to clients of the firm principally with respect to private law issues arising in the context of transactions and litigation. Patrick Bernes, Portfolio Manager, Public Sector Investment Board Patrick Bernes is a global macro portfolio manager involved in managing absolute return strategies for the Public Service Pension Investment Board, the Canadian Crown Corporation mandated with investing the pensions of Government of Canada employees. Thomas A. Bernes, Executive Director, CIGI Prior to joining CIGI in 2009, Thomas A. Bernes was director of the IMF’s Independent Evaluation Office. Before that, he was executive secretary of the joint IMF-World Bank Development Committee and deputy corporate secretary of the World Bank. From 1996 to September 2001, Mr. Bernes was the IMF executive director for Canada, Ireland and the Caribbean. He has been Canada’s assistant deputy minister of finance and G7 finance deputy, in addition to 11
holding various senior finance, foreign affairs and trade policy positions within the Canadian government. In the mid-1980s, Mr. Bernes served as head of the Organisation for Economic Co-operation and Development’s (OECD) General Trade Policy Division. Carol Bonnett, Managing Editor, Publications, CIGI Carol Bonnett is managing editor, publications at CIGI. Ms. Bonnett has responsibility for the overall quality of CIGI’s official publications, overseeing the development, editing, design and production of CIGI’s published outputs, in collaboration with CIGI Programs and project partners. Prior to joining CIGI in 2010, Ms. Bonnett held senior positions in professional and trade publishing houses. She was the editorial director and vice president of business development of ISI Publications, an international publisher specializing in global capital markets and securities regulations, corporate governance and anti-money laundering developments in its Bermuda office, and was previously the director of contracts and subsidiary rights and editor-at-large at HarperCollins Canada. John T. (Jack) Boorman, Retired, IMF Jack Boorman was, for more than 11 years, the director of the Policy Development and Review Department of the IMF. In the latter years of his career with the Fund, he was counsellor and special advisor to the managing director. He held several other positions in the Fund, including in the European and Asian Departments, and as resident representative in Indonesia. Before his career in the IMF, Mr. Boorman taught at the University of Southern California, from which he received his Ph.D. in economics, and at the University of Maryland. He also served as a financial economist in the Research Department of the Federal Deposit Insurance Corporation. Mr. Boorman is the author of a number of books and many papers on diverse topics including development, structural adjustment, and developing country debt; emerging market country issues; international insolvency; governance; and IMF policies and country operations. Mr. Boorman currently serves as advisor to the director of the Independent Evaluation Office in the IMF, as a member of the advisory board of the Emerging Markets Forum, as the chairman of the Investment Committee of the Board of Trustees of LeMoyne College, and continues to write and speak on global governance, domestic and international economic policy issues, emerging markets and other topics. Most recently, he served as a member of the Palais Royal Group, a group of eminent persons from around the world that has produced a report recommending reform to the international monetary system. He has recently edited a book on the background material produced for that initiative.
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SOVEREIGN DEBTORS IN DISTRESS ARE OUR INSTITUTIONS UP TO THE CHALLENGE?
Michael Bordo, Professor of Economics, Rutgers University Michael D. Bordo is an expert in monetary history. He is a professor at Rutgers University and research associate of the National Bureau of Economic Research. In 2011-2012 he is a national fellow at the Hoover Institution, Stanford University. He has published widely in leading journals and has written or co-authored 12 books. His publications have focused on financial crises, monetary regimes, central banking and monetary policy, monetary unions, exchange market intervention and the Great Depression. He has consulted for or been a visiting scholar at the IMF, the Federal Reserve, Bank for International Settlements, World Bank, Bank of Canada and Bank of England. Scott Burk, President, Wealhouse Capital Management Scott Burk is a chartered financial analyst and the president of Toronto-based Wealhouse Capital Management. Along with his board duties at CIGI, Mr. Burk is a treasurer and a board member of the Canadian International Council (www. opencanada.org). Scott Clark, President, C. S. Clark Consulting Scott Clark is currently president of C. S. Clark Consulting. Prior to that, Mr. Clark held a number of senior positions in the Canadian government dealing with both domestic and international policy issues. In regard to domestic policy issues, Mr. Clark served in a number of assistant deputy minister positions in the Department of Finance. He also served as associate deputy minister of finance (1994−1997), deputy minister of finance (1998–2001) and senior adviser to the prime minister (2001). Don Coletti, Chief, International Economic Analysis Department, Bank of Canada Don Coletti was appointed chief of the bank’s International Economic Analysis Department in September 2010. In this capacity, he is responsible for overseeing the activities of the department, which include analyzing current and prospective developments in foreign countries and commodity prices, as well as providing analysis and policy advice on global economic and financial issues. The department is also actively engaged in conducting in-depth research on topics related to international financial markets and the global economy. Mr. Coletti rejoined the bank in 2000 after two years at the Department of Finance. Since then, he has held a number of positions including research director for both the international and research departments, and assistant chief for Canadian projections and model development. From 2008 until his current appointment, Mr. Coletti was deputy chief of the Bank of Canada’s Canadian Economic Analysis Department. Born in Bolzano, Italy, Mr. Coletti obtained both a bachelor of arts and a master’s degree in economics at the University of Western Ontario. 13
Carlo Cottarelli, Director, Fiscal Affairs Department, IMF Carlo Cottarelli, a citizen of Italy, has been director of the Fiscal Affairs Department since November 2008. After receiving degrees in economics from the University of Siena and the London School of Economics, he joined the Research Department of the Bank of Italy, where he worked from 1981 to 1987. Mr. Cottarelli joined the IMF in 1988, working for the Fiscal Affairs Department, the European Department, the Monetary and Capital Markets Department, and the Policy Development and Review Department. He was deputy director both in the European Department and the Policy Development and Review Department. Mr. Cottarelli has worked on several advanced, emerging market and lowincome countries in the context of surveillance, IMF-supported programs, and technical assistance, including Albania, Croatia, Hungary, Lebanon, Russia, Serbia, Tajikistan, Turkey, Italy and the United Kingdom. He has written several papers on fiscal and monetary policies and institutions, and edited books on inflation, monetary policy and exchange rates. David Dewitt, Vice President Programs, CIGI David Dewitt joined CIGI as vice president of programs in July 2011, and oversees the strategy and implementation of all the organization’s work programs and research-related activities. Previously, he was associate vicepresident of research, social sciences and humanities, professor of political science, and university professor at York University in Toronto. David earned a B.A. at the University of British Columbia and an M.A. and Ph.D. from Stanford University, and served as director of York University’s Centre for International and Security Studies from 1988 to 2006. He is author or contributing editor of numerous books, refereed articles and chapters in addition to commissioned papers on Canadian foreign, security and defence policy, international and regional security and conflict management in Asia Pacific and the Middle East, arms control and proliferation, and human security. In the early 1990s, he codirected the North Pacific Cooperative Security Dialogue, a Foreign Affairssponsored Track Two Diplomacy initiative, and has been involved in various track two initiatives on security in the Asia Pacific and in the Middle East. He has led a number of policy focused research NGOs that have dealt with security and governance issues in these two regions.
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Donal Donovan, Council Member, Irish Fiscal Advisory Council Donal Donovan holds a B.A. from Trinity College Dublin and a Ph.D. from the University of British Columbia. He was a staff member of the IMF from 1977 to 2005, before retiring as a deputy director. He was a member of the two official enquiries into the causes of the Irish financial crisis and is a member of the Irish Fiscal Advisory Council. Mr. Donovan is currently adjunct professor at the University of Limerick and a visiting lecturer at Trinity College Dublin, and has contributed extensively in the media on the subject of Ireland’s economic crisis. Jeffrey Frankel, Professor, Harvard University Jeffrey Frankel is Harpel Chair at Harvard University’s Kennedy School of Government. He also directs the NBER program in International Finance and Macroeconomics and is a member of the NBER Business Cycle Dating Committee, which officially declares US recessions. Mr. Frankel served in the White House as a member of President Clinton’s Council of Economic Advisers, with responsibility for international economics, macroeconomics and the environment (1996–1999). Previously, he was professor of economics, University of California, Berkeley. He serves on the advisory committees of the New York and Boston Federal Reserve Banks, Bureau of Economic Analysis and the Institute for International Economics. His economics Ph.D. is from MIT. François Gianviti, Consultant, IMF François Gianviti is professor of law (France), honorary dean of the Faculty of Law and Political Science of Paris XII University, former general counsel of the IMF and judge of the Regulatory Tribunal of the Qatar Financial Centre. Martin Gilman, Director, Centre for Advanced Studies, National Research University Higher School of Economics Martin Gilman is professor of economics at the National Research University Higher School of Economics and the director of its Centre for Advanced Studies, in conjunction with the New Economic School in Moscow. Mr. Gilman’s extensive experience with Russia began as the adviser from the IMF’s policy department on the negotiating missions from June 1993, and then he moved to Russia in November 1996 as the head of the IMF’s Moscow Office. He was responsible for official debt issues and served as the IMF’s representative to the Paris Club. MIT Press recently published his book on Russia’s 1998 default. In addition to his Ph.D. from the London School of Economics, Mr. Gilman attended the Institut d’Etudes Politiques, Paris, the School of Advanced International Studies of the John Hopkins University and the Wharton School of the University of Pennsylvania. 15
Richard Gitlin, President, Gitlin & Company, LLC Richard Gitlin helped lead developments in corporate and sovereign debt restructurings. He was founder or president of Insol International, the American College of Bankruptcy and the American Bankruptcy Institute. He has helped many countries improve their bankruptcy laws. He proposed the Sovereign Debt Forum for sovereign debt restructurings and was the lead drafter of the Principles for Sovereign Debt Restructurings issued by the Council on Foreign Relations. Sean Hagan, General Counsel and Director of the Legal Department, IMF Sean Hagan is general counsel and director of the Legal Department at the IMF. In this capacity, Mr. Hagan advises the Fund’s management, executive board and membership on all legal aspects of the Fund’s operations, including its regulatory, advisory and lending functions. Mr. Hagan has published extensively on the both the law of the Fund and a broad range of legal issues relating to the prevention and resolution of financial crises, with a particular emphasis on insolvency and the restructuring of debt, including sovereign debt. Prior to beginning work at the IMF, Mr. Hagan was in private practice, first in New York and subsequently in Tokyo. Mr. Hagan received his juris doctor from the Georgetown University Law Center and also received a master of science in international economic policy from the London School of Economics and Political Science. JAMES Haley, Director of the Global Economy Program, CIGI James Haley has served in a number of positions in the federal Department of Finance prior to being appointed director of the Global Economy Program at CIGI. As general director of the International Trade and Finance branch, he represented Canada in various international fora including G20 working groups on IMF reform and the G20 Framework on Strong, Sustainable and Balanced Growth as co-chair. Mr. Haley has also served as a staff member of the Research Department of the IMF, and was research director in the International Department of the Bank of Canada. He is a lecturer on international finance and macroeconomics at the Norman Paterson School of International Affairs at Carleton University. Paul Jenkins, Distinguished Fellow, CIGI Paul Jenkins received his M.Sc. in economics from the London School of Economics and Political Science in England and his B.A. in economics from the University of Western Ontario in London, Canada. From 2003 to 2010, Mr. Jenkins served as senior deputy governor of the Bank of Canada. He was the bank’s chief operating officer and a member of its board of directors. His duties 16
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included overseeing strategic planning, the conduct of monetary policy as a member of the bank’s governing council and participating in fulfilling the bank’s responsibilities for promoting financial stability. At CIGI he provides strategic advice on the Global Economy research program, including activities related to the CIGI-INET partnership and broader macroeconomic issues. In addition to his position at CIGI, Mr. Jenkins is a member of the board of governors of the University of Western Ontario; senior distinguished fellow in the Faculty of Public Affairs, Carleton University; and a senior fellow, C. D. Howe Institute. Mark Jewett, Counsel, Bennett Jones LLP Mark Jewett is counsel to Bennett Jones LLP in Ottawa, where he provides strategic advice on financial regulation and public policy. He was formerly general counsel and corporate secretary of the Bank of Canada and senior assistant deputy minister with the Canadian Justice and Finance Departments. He has held many other senior positions with the Government of Canada, with Debevoise & Plimpton, in New York, and with the European Commission in Brussels. He is currently special adviser to the Justice and Finance Departments on Banking and Financial Institutions Law, and a member for Canada of the International Monetary Law Committee of the International Law Association. He was a member of the G10 Working Group on Collective Action Clauses. Robert Johnson, Executive Director, INET Robert Johnson is the executive director of INET and a senior fellow and director of the Global Finance Project for the Franklin and Eleanor Roosevelt Institute in New York. Mr. Johnson is an international investor and consultant to investment funds on issues of portfolio strategy. He recently served on the United Nations Commission of Experts on International Monetary Reform under the chairmanship of Joseph Stiglitz. Previously, he was a managing director at Soros Fund Management, where he managed a global currency, bond and equity portfolio specializing in emerging markets. Prior to working at Soros Fund Management, Mr. Johnson was a managing director at Bankers Trust Company, managing a global currency fund. He served as chief economist of the US Senate Banking Committee under the leadership of Chairman William Proxmire (D., Wisconsin). Before that, he was senior economist of the US Senate Budget Committee under the leadership of Chairman Pete Domenici (R., New Mexico). Mr. Johnson was an executive producer of the Oscar-winning documentary, Taxi to the Dark Side, directed by Alex Gibney, and is the former president of the National Scholastic Chess Foundation. He currently sits on the board of directors of both the Economic Policy Institute and the Campaign for America’s Future. Rob received a Ph.D. and M.A. in economics from Princeton University and a B.S. in both electrical engineering and economics from the Massachusetts Institute of Technology. 17
Anatole Kaletsky, Editor-at-Large, The Times; Vice Chairman, GaveKal Dragonomics Anatole Kaletsky is editor-at-large of The Times, where he writes a weekly column on economics and government, and vice chairman of GaveKal Dragonomics, a Hong Kong group that provides investment analysis to 700 financial institutions, runs the MacroBond database service and manages $1.5 billion of Asian and US assets in a joint venture with Marshall Wace. Mr. Kaletsky is also chairman of INET. From 1976 to 1998, he was a full-time journalist on The Times, The Economist and the Financial Times, where he was Washington correspondent and New York bureau chief. His journalism has received many awards, including Commentator of the Year, Economic Journalist of the Year, European Journalist of the Year and Specialist Writer of the Year. His recent book, Capitalism 4.0, about the new model of capitalism emerging from the global financial crisis, was nominated for the BBC’s Samuel Johnson Prize. His 1985 book, The Costs of Default, was the first detailed cost-benefit analysis of sovereign debt defaults and influenced the resolution of the Latin American debt crisis via Brady Bonds. Mr. Kaletsky was educated at King’s College, Cambridge, where he gained a first-class degree in mathematics, and at Harvard University, where he was a Kennedy Scholar and received an M.A. in economics. He has an honorary doctor of science from the University of Buckingham. Sony Kapoor, Managing Director, Re-Define Sony Kapoor is managing director of Re-Define (www.re-define.org), a think tank that advises policy makers on finance, development and the economy. He has been a consultant to the European Parliament, European Commission, and several EU and non-EU governments. He was recently elected chair of the stakeholder group of the European Banking Authority and is also a visiting fellow at the London School of Economics. Mr. Kapoor started his career in financial services and, after stints working on leveraged finance and trading derivatives, quit to work full time on public policy. He has also worked with development NGOs such as Christian Aid and Oxfam Novib, co-founded the Tax Justice Network and was a consultant to the World Bank and United Nations on development and international finance. He holds an engineering degree from the Indian Institute of Technology, an M.B.A. from the University of Delhi and an M.Sc. in international finance from the London School of Economics. Fred Kuntz, Vice President of Public Affairs, CIGI As vice president of public affairs, Fred Kuntz is responsible for CIGI publications, communications, digital media and public events. Mr. Kuntz joined CIGI in 2010 following a 30-year career in major Canadian media, including as editorin-chief of The Toronto Star, publisher of Grand River Valley Newspapers and
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associate editor of The Globe and Mail. He has a B.A. in journalism from Ryerson University and an honorary doctorate of letters from Wilfrid Laurier University. He completed the Directors Education Program of the Institute of Corporate Directors and is a member of the board of directors of Ontario’s largest hospital, the Credit Valley Hospital and Trillium Health Centre. Paul Martin, Former Prime Minister of Canada The Right Honourable Paul Martin was the twenty-first prime minister of Canada from 2003 to 2006, minister of finance from 1993 to 2002 and the Member of Parliament for LaSalle-Émard in Montreal, Quebec from 1988 to 2008. During his tenure as minister of finance, he erased Canada’s deficit, which was the worst of the G7, subsequently recording five consecutive budget surpluses, while paying down the national debt and setting Canada’s debt-to-GDP ratio on a steady downward track. He also introduced the largest tax cuts in Canadian history and the largest increases in the federal government’s support for education and research and development. In September 1999, having initiated the concept, Mr. Martin was named the inaugural chair of the Finance Ministers’ G20. As prime minister, he pushed strongly for its elevation to the leaders’ level, which subsequently occurred in 2008. Daniel Marx, Executive Director, Quantum Finanzas Daniel Marx is the executive director of Quantum Finanzas, a financial boutique in Buenos Aires. He was secretary of finance of Argentina (2000-2001) and chief debt negotiator (1988–2003), in charge of the design and execution of the sovereign debt restructuring and financing program. He has held a number of executive positions, including head of the Corporate Department of Banco Río, director of the Central Bank, managing director of Darby Investments, executive director of Merchant Bankers Asociados and a board member of Banorte (Mexico) and Interbank (Peru). He holds degree in economics from the University of Buenos Aires and teaches international finance at the Universidad de San Andres. Rohinton Medhora, Vice President, Programs, International Development Research Centre Rohinton Medhora received his doctorate in economics in 1988 from the University of Toronto, where he also subsequently taught for a number of years. His fields of expertise are monetary and trade policy, aid effectiveness and international economic relations. He is currently co-editing, with David Malone and Ravi Kanbur, a handbook on development thought and practice, to be published by Oxford University Press in early 2013. His blog, Development Research Works, may be found at http://blog.idrc.ca/medhora/.
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Scott Morrison, CIO, Wealhouse Capital Management Scott Morrison is a founding partner and the chief investment officer of Wealhouse Capital Management. Scott has 17 years of experience in the public and private global capital markets. Scott has worked as a senior portfolio manager for a variety of investment management firms including: Mackenzie Financial, CI Funds, EL Financial and Investors Group. Scott was also a member of the board for Timbercreek Real Estate Investment Trust from 2004 to 2010. Mr. Morrison sits on the Finance Committee of CIGI. In that capacity, Mr. Morrison oversees the investment firms entrusted with managing CIGI’s endowment funds. Rebecca Nelson, Analyst in International Trade and Finance, Congressional Research Service Rebecca Nelson is an analyst in international trade and finance at the Congressional Research Service (CRS). In this capacity, she provides authoritative and non-partisan research for members of congress and their staffs on a range of issues, including the euro zone crisis, sovereign debt in advanced economies, the G20 and the IMF. Before joining CRS in 2009, she completed her Ph.D. in political science at Harvard University. Drummond Pike, Principal, Equilibrium Capital Drummond Pike founded Tides Foundation in 1976, Tides Center in 1996, the Advocacy Fund in 1994, Groundspring.org in 1999, Tides Inc. in 2003, Tides Shared Spaces in 2004 and Tides Network in 2006. He served as chief executive of all until November 2010. He now consults with several principals on philanthropic and financial matters and is a principal with Equilibrium Capital, a private equity impact investing firm based in Portland, OR. He is a member of the following boards: Working Assets (Credo Mobile), Island Press, Environmental Working Group, Tides Canada Foundation, Democracy Alliance; as well as a member of several foundations. A fourth-generation Californian, Mr. Drummond is also a commercial river guide in the Grand Canyon with AzRA. Jean Pisani-Ferry, Director, Bruegel Jean Pisani-Ferry is the director of Bruegel, the Brussels-based economic think tank, and professor of economics with Université Paris-Dauphine. He was previously executive president of the French prime minister’s Council of Economic Analysis (2001-2002); senior economic adviser to the French minister of finance (1997–2000); director of CEPII, the French institute for international economics (1992–1997); and economic adviser with the European Commission (1989–1992). His current research interests are economic policy in Europe and global macroeconomics. He has regular columns in Le Monde, Handelsblatt, Project Syndicate and the Chinese magazine Century Weekly.
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SOVEREIGN DEBTORS IN DISTRESS ARE OUR INSTITUTIONS UP TO THE CHALLENGE?
Lee Price, Deputy Director for Research Programs, INET Lee Price joined INET in 2011 after 28 years in various positions in Washington, DC. He was chief economist at House Appropriations the last four years, and has held a similar title at the Commerce Department under President Clinton, and at other congressional committees (Joint Economic, Senate Budget, House and Senate Banking). He majored in economics at Stanford University and was in a joint program in economics and law at the University of Michigan, where he earned an M.A. and J.D. Poonam Puri, Associate Dean, Research, Graduate Program and International Relations; Co-Director, Hennick Centre for Business and Law, Osgoode Hall Law School, York University Poonam Puri is one of Canada’s most respected scholars and commentators on issues of corporate governance, corporate law and securities law. She is associate dean, research, graduate studies and institutional relations at Osgoode Hall Law School, York University. She is also co-director of the Hennick Centre for Business and Law, a joint initiative of Osgoode Hall Law School and the Schulich School of Business at York University, and serves as head of research and policy at the Capital Markets Institute, Rotman School of Business, University of Toronto. Her work is academically rigorous as well as firmly grounded in the real time of policy making. It is for this reason that governments and regulators in Canada and internationally have sought her expertise. In 2008, she was appointed to the board of directors of the Greater Toronto Airports Authority and is currently chair of its Corporate Governance and Nominating Committees. She also sits on the board of governors of Mount Sinai Hospital and is a member of the National Advisory Council for Statistics Canada. She has an LL.B. degree from the University of Toronto, where she was the silver medalist in her 1995 graduating law class, and she holds a master of laws (LLM) degree from Harvard Law School. She is a 2005 recipient of Canada’s Top 40 Under 40™ award, the 2008 recipient of the Indo-Canada Chamber of Commerce Female Professional of the Year Award, and the 2010 recipient of the Professional Excellence Award from the Canadian Association of South Asian Lawyers and the Lawyer of the Year from the South Asian Bar Association. In 2011, she was named one of Women Executive Network’s 100 Most Powerful Women in Canada. Andrés Rozental, Eminent Ambassador of Mexico Andrés Rozental was Mexico’s ambassador to the United Kingdom from 1995 to 1997. He was a career diplomat for more than 35 years, having served his country as deputy foreign minister (1988–1994), ambassador to Sweden (1983–1988), permanent representative of Mexico to the United Nations in Geneva (1982–
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1983), as well as in various responsibilities within the Mexican Foreign Ministry and abroad. Since 1994, he has held the lifetime rank of eminent ambassador of Mexico. Susan Schadler, Visiting Senior Fellow, CIGI Susan Schadler is a visiting senior fellow at CIGI and a senior fellow at the Atlantic Council in Washington DC. Prior to this, she spent many years at the IMF, most recently as deputy director of the European Department. She has also held visiting positions at Georgetown University, Oxford University and the International Food Policy Research Institute. She has published on a wide variety of issues in political economy, including the effectiveness of international institutions, European economies, international development and surges in capital flows. Her current work focuses on international governance and the resolution of sovereign debt crises. Pierre Siklos, Senior Fellow, CIGI Pierre Siklos is professor of economics at Wilfrid Laurier University in Waterloo, and director of the Viessmann European Research Centre. He is a member of the Monetary Policy Council of the C.D. Howe Institute, where he has also been a research fellow since August 2010. His research focuses on applied econometrics, monetary economics and international finance. Mr. Siklos has been a visiting lecturer at several universities across Europe, North America, Australia and New Zealand. In 2008, he was chair holder of the Bundesbank Foundation of International Monetary Economics at the Freie Universitat, Berlin. He has been a consultant to a variety of institutions and central banks. He is also a member of the Scientific Committee of the Rimini Centre for Economic Analysis. George Soros, Chairman, Soros Fund Management LLC George Soros is chairman of Soros Fund Management LLC and founder of the Open Society Foundations. He was born in Budapest in 1930. He survived the Nazi occupation and fled communist Hungary in 1947 for England, where he graduated from the London School of Economics. He then settled in the United States, where he accumulated a large fortune through an international investment fund he founded and managed. Mr. Soros has been active as a philanthropist since 1979, when he began providing funds to help black students attend Cape Town University in apartheid South Africa. He has established a network of philanthropic organizations active in more than 70 countries. These organizations are dedicated to promoting the values of democracy and an open society. The foundation network spends about $500 million annually. Mr. Soros is the author of 12 books, including most recently, Financial Turmoil in Europe and the United States. His articles and essays on politics, society and economics regularly appear in major newspapers and magazines around the world. 22
SOVEREIGN DEBTORS IN DISTRESS ARE OUR INSTITUTIONS UP TO THE CHALLENGE?
Jürgen Stark, Former Member of the Executive Board of the European Central Bank Jürgen Stark was a member of the executive board and the governing council of the European Central Bank (ECB) from June 2006 until December 2011. He was responsible for economics, statistics and information systems. Before joining the ECB, Mr. Stark was vice-president of the Deutsche Bundesbank, where he held responsibility for European and international affairs. Prior to this position he served as state secretary at the German Federal Ministry of Finance and as personal representative of the Federal Chancellor in the preparation of G7/ G8 economic summits for four years. Before that, he held various positions at the Ministry of Finance, the Federal Chancellery and the Federal Ministry of Economics, dealing with national and international monetary and financial issues. His publications include many articles and papers in professional journals on public finances, European monetary integration, institution building and the global financial system. Mr. Stark was born in Gau-Odernheim (Rhineland Palatinate) in 1948. He studied economics at the universities of Hohenheim and Tübingen and graduated in 1973. He gained a doctorate in economics in 1975 and was appointed honorary professor by the University of Tübingen in 2005. Federico Sturzenegger, President, Banco Ciudad de Buenos Aires Federico Sturzenegger is currently president of Banco Ciudad de Buenos Aires and professor at Universidad Torcuato Di Tella and HEC, Paris. He holds a Ph.D. in economics from MIT (1991), was assistant professor of economics at UCLA (1991–1995), chief economist of YPF (1995–1998), dean of the business school at Di Tella (1998–2000/2002–2005), secretary of economic policy of the Republic of Argentina (2001), visiting professor of public policy at the Kennedy School of Government, Harvard University (2005–2007) and visiting professor in HEC, Paris since 2000. He has written or edited seven books, and has published extensively in the area of international finance and macroeconomics. He appears regularly in the press, and is a regular consultant to corporations and international organizations. In 2005, the World Economic Forum at Davos selected him as a Young Global Leader. Susan Tanaka, Vice President for Research, Peter G. Peterson Foundation Susan Tanaka leads the Peter G. Peterson Foundation’s research and policy activities. The mission of the foundation is to increase public awareness of the nature and urgency of key economic challenges threatening America’s future and to accelerate action on them. To meet those challenges successfully, the foundation works to bring Americans together to find and implement sensible,
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long-term solutions that transcend age, party lines and ideological divides in order to achieve real results. As a member of the foundation’s senior staff, Ms. Tanaka participates in the foundation’s overall strategic planning efforts, the development and design of new programs and projects, and the direction of grant-making activities. Before moving to New York, she held positions in Washington including associate director for communications and senior analyst at the Congressional Budget Office, vice president of the Committee for a Responsible Federal Budget, a bipartisan, non-profit educational organization, and budget examiner and special assistant in the US Office of Management and Budget. She has also worked in a consulting capacity for non-governmental organizations including the Organisation for Economic Development and Co-operation, the National Academy for Public Administration, the Concord Coalition and the Committee for a Responsible Federal Budget. Ms. Tanaka holds an M.B.A. from the Yale School of Management, an M.A. from the Fletcher School of Law and Diplomacy, and a B.A. from Antioch College. Gordon Thiessen, Former Governor, Bank of Canada Gordon Thiessen was appointed governor of the Bank of Canada on February 1, 1994, for a term of seven years, retiring on January 31, 2001. Mr. Thiessen studied economics at the University of Saskatchewan and received an honours B.A. and an M.A. He also lectured in economics at the university. Thereafter, he attended the London School of Economics, from which he received his Ph.D. in economics. He joined the Bank of Canada in 1963 and worked in both the research and the monetary and financial analysis departments of the bank. Mr. Thiessen spent the period from 1973 to 1975 as a visiting economist at the Reserve Bank of Australia. In 1996, the government of Sweden awarded Mr. Thiessen the Order of the Polar Star in recognition of the assistance provided by the Bank of Canada to the Swedish central bank. In 1997, Mr. Thiessen received an honorary doctor of laws degree from the University of Saskatchewan, and in 2001 an honorary doctor of the university degree from the University of Ottawa. He became an Officer of the Order of Canada in 2003. In 2002, Mr. Thiessen became the founding chair of Canada’s new auditor oversight agency, the Canadian Public Accountability Board. He served in that position until 2008. He has also served on the boards of corporations, a university and a research organization as well as on a number of investment committees. Andrés Velasco, Tinker Visiting Professor, Columbia University Andrés Velasco was the minister of finance of Chile between March 2006 and March 2010. During his tenure, he was recognized as Latin American Finance Minister of the Year by several international publications. His work to save Chile´s copper windfall and create a rainy-day fund was highlighted in the Financial 24
SOVEREIGN DEBTORS IN DISTRESS ARE OUR INSTITUTIONS UP TO THE CHALLENGE?
Times, The Economist, The Wall Street Journal and Bloomberg, among many others. Mr. Velasco is currently Tinker Visiting Professor at Columbia University. He holds a Ph.D. in economics from Columbia and was a postdoctoral fellow in political economy at Harvard University and the Massachusetts Institute of Technology (MIT). He received a B.A. in economics and philosophy and an M.A. in international relations from Yale University. Prior to entering government, Mr. Velasco was Sumitomo-FASID Professor of Development and International Finance at Harvard University’s John F. Kennedy School of Government, an appointment he had held since 2000. Earlier, he was associate professor of economics and director of the Center for Latin American and Caribbean Studies at New York University and assistant professor at Columbia University. Mr. Velasco is a research associate of the National Bureau of Economic Research in Cambridge, Massachusetts, an international research fellow at the Kiel Institute for World Economics in Kiel, Germany, and was the president of Expansiva, a think tank in Santiago, Chile. He has been a consultant to the IMF, the InterAmerican Development Bank, the World Bank and ECLAC. He was president of the Latin American and Caribbean Economic Association (LACEA) from 2005 to 2007. In February 2006 he received the Award for Excellence in Research granted by the Inter-American Development Bank. In addition to nearly 100 academic papers and three academic books, he has published two works of fiction in Spanish: Vox Populi (Editorial Sudamericana, 1995) and Lugares Comunes (Editorial Planeta, 2003). Eric Weiner, Senior Editor/Director of Communications, INET Eric J. Weiner is senior editor and director of communications for INET. Prior to joining INET, he spent 20 years as a journalist covering business and economics issues. He is the author of two critically acclaimed books: The Shadow Market, an eye-opening examination of America’s diminishing power in the global economy, which was published by Scribner in September 2010 and was named one of the “Favorite 50” business books of 2009 and 2010 by Bloomberg Businessweek magazine; and What Goes Up, an oral history of Wall Street since the Great Depression, which was published by Little, Brown and Company in September 2005, and was named one of the year’s best books by Barron’s and Kiplinger’s magazines. A former columnist, reporter and editor for Dow Jones Newswires, he has written for The Wall Street Journal, Los Angeles Times, Boston Globe, Village Voice, Huffington Post, and numerous other major print and online publications.
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Preparatory Document for Participants Susan Schadler A defining feature of the economic landscape in the current decade is the reemergence of major sovereign debt crises. The benign economic conditions prior to the global crisis — abundant savings, strong growth and widespread improvements in macroeconomic policies in emerging markets — had lulled markets and policy makers into complacency about the risks of a new spate of sovereign debt crises. Yet, these conditions paved the way to heavy sovereign borrowing, as well as bank borrowing, some of which was later taken over by sovereigns. The Greek crisis, followed by the market re-evaluation of other fragile euro area sovereigns, has been a harsh reminder of the alarming speed at which countries with high sovereign debt can be pushed into crisis; and, contrary to a widespread conviction, advanced countries have not been immune. Once again, a recurrent question of modern history arises: are our institutions up to the challenge of efficiently managing and resolving debt crises?
Scoping the Current Risks of Sovereign Debt Crises The urgency of taking a fresh look at the international financial architecture for crisis resolution stems from more than just the severity of the euro zone difficulties. Broader vulnerabilities in the global economy are also flashing danger signals, though controversies abound on how to judge the extent of the risks. High sovereign debt levels in some countries; the demonstration that advanced countries are more susceptible to debt crises than was commonly assumed in the past; concerns about the strength of the world economy over the next several years; and the likelihood that interest rates will not remain at current, historically low levels, are all relevant factors in any consideration of current vulnerabilities to debt crises.
Managing and Resolving Crises — Have We Got It Right? The International Monetary Fund (IMF), although originally set up to oversee the international monetary system and lend into balance of payments (or, more specifically, current account) crises, has become the central institution for managing and resolving sovereign debt problems. Procedures in carrying out this responsibility evolved as this role emerged, although their roots in current account crises are still evident. Typically, at the point when private financing flows have dried up, a country seeks new or augmented assistance from the IMF. A program of adjustment policies (to lower fiscal deficits, rein 26
SOVEREIGN DEBTORS IN DISTRESS ARE OUR INSTITUTIONS UP TO THE CHALLENGE?
in domestic demand and bolster output growth) is agreed. IMF financing, at times in conjunction with other official and private financing, is provided for a three- to five-year period. At this initial stage, any need for debt restructuring is typically denied. In the euro zone crisis, however, limits on IMF financing, or even the criteria that were supposed to qualify countries for exceptional levels of financing, have been largely abandoned. This approach does have a record of successes in sovereign debt crises. Often, it has been sufficient to restore market confidence and start the process of recovery — Mexico in 1994, Brazil in 1999 and Turkey in 2001 stand out for the speed of the return to stable macroeconomic conditions, resumption of growth and regaining of market access with no debt restructuring. It has also had its failures — the default and/or restructuring of public debt in quite tense or even disorderly conditions (Russia in 1998, Argentina in 2001, and Greece, 2012). In some of these cases, market access was lost while the government was engaged in an IMF lending arrangement that had started well before crisis conditions had developed. In all cases, default and the protracted nature of debt resolution were enormously costly — for the country itself, as economic conditions and availability of essential financing deteriorated; for creditors, to whom contractual payments were disrupted; for financial markets, which experienced increased uncertainty and volatility; and for other countries, which were affected by contagion. These experiences raise a fundamental question about the role of the IMF in crisis resolution: Do current procedures produce a balanced consideration of relative costs of financing and restructuring? Two key issues are central to considering this question. First, whether the progressive easing of limits on the amount the IMF can lend into sovereign debt crises has been appropriate, and second, whether the institutional structure for debt restructuring procedures is adequate. The recent experience of Europe also raises the question of how well the role of the IMF functions when multiple parties are involved in a rescue effort.
A Comment on the History Financing Limits Historically, IMF financing was subject to access limits — ceilings on the amount of IMF funding calibrated in terms of a country’s IMF quota — designed to protect the IMF’s liquidity, but indirectly acting as a limit on financing. As the scale of crises rose in the late 1990s, criteria for exceeding the limits (exceptional financing) were established and used. These criteria were designed to ensure that:
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• the IMF could respond with financing on an adequate scale; • exceptional financing would not be employed when debt levels were fundamentally unsustainable; and • markets would understand that in some conditions restructuring would be part of crisis resolution. Yet even these more lenient limits proved short lived. For Greece, the exceptional financing criteria were not met in their entirety, but the impulse to provide exceptional financing to avoid or at least delay restructuring remained strong. The solution was to revise the rules to allow the IMF to provide exceptional financing to countries that did not meet the criteria, but were “systemically important.” Restructuring Mechanisms In late 2001, then First Deputy Managing Director Anne Krueger spearheaded a major review of the need for a more formal debt restructuring mechanism to expand the tools for managing situations of excessively indebted sovereign borrowers.1 In a December 2001 speech setting out the Fund’s objectives, she stated, “we need to look at ways to help countries with unsustainable debts deal with them in a prompt and orderly fashion — and without forcing the international community to bail out private creditors in a way that encourages inappropriate lending…” Effectively, Krueger’s question was this: In our approach to resolving debt crises, is there an institutional gap that constitutes a harmful bias against restructuring? Over the ensuing year and a half, proposals for reforms to achieve this objective were hotly debated. Many agreed that more systematic procedures for restructuring excessive sovereign debt were needed to address collective action and coordination problems. In other words, bondholders needed to have incentives and clear rules of the game for debt restructuring agreements. But others argued that the combination of IMF bailouts and, when necessary, unilateral debt exchange offers (or voluntary restructurings) had worked adequately. Reforms to facilitate restructuring would introduce an incentive for borrowing countries to renege on contractual commitments, raise the cost of sovereign financing and impair sovereign debt markets. Even advocates of reform differed on the path it should take. A contractual approach would require bond contracts to include Collective Action Clauses 1 This debate focused on approaches to sovereign debt crises in emerging-market countries. At the time, sovereign debt crises in advanced countries were considered very low probability events and, should they arise, unlikely to involve the IMF. Sovereign debt problems in low-income countries were handled through the IMF’s Heavily Indebted Poor Country Initiative established in 1996.
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SOVEREIGN DEBTORS IN DISTRESS ARE OUR INSTITUTIONS UP TO THE CHALLENGE?
(CACs). These specify ex ante procedures for restructuring that are binding on all bondholders if supported by a threshold majority. A statutory approach (embedded in an IMF staff proposal to create a Sovereign Debt Restructuring Mechanism [SDRM]) would establish a quasi-judicial process (akin to bankruptcy proceedings) for restructuring sovereign debt.
Where Are We Now? The outcome of the 2001–2003 debate — the abandonment of the SDRM proposal and a general expansion of the use of CACs — reflected the interplay of a wide range of interests: those of governments of countries with large concentrations of private creditors, of the private creditors themselves and of emerging markets (then considered to be the group whose interests as debtors were at stake). CACs, which were already common in bonds issued under UK law, subsequently became more common in bonds issued under US law. It is reported that most emerging-market international bond issues now include CACs. But with only a handful of relatively small emerging-market debt crises since 2003, the degree to which CACs facilitate orderly restructuring or influence the balance of considerations between financing and restructuring has yet to be put to a demanding test. A different kind of test is unfolding in Greece. Like other advanced countries, Greece has CACs in only a small share of bond contracts.2 This is, in part, because the vast majority of Greek bonds are issued under domestic law, which in principle could be changed to mandate revised terms on all bondholders. The initial response to the crisis was exceptional financing and a denial that restructuring would be necessary. A year and a half later, restructuring negotiations started on a “voluntary” basis. The outcome will shed light on a number of questions, including: can voluntary restructuring be agreed to and implemented successfully when proportionately large losses are imposed on creditors; and what will be the implications for the operation of the credit default swap (CDS) market (given that CDS instruments would not be activated by a voluntary debt exchange offer)?
2 As of 2013, the European Union will require that all sovereign bonds issued by members include a CAC.
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Conference Objectives3 The central objective of the conference is to consider, drawing on historical experiences, the international institutional architecture for addressing sovereign debt crises. Three primary questions will be examined. First, judging by forward-looking measures and historical experience, how vulnerable is the global economy over the next decade to significant, and/or systemically important, sovereign debt crises? Second, how efficient, and indeed sustainable, is the existing approach — that is, IMF-backed bailouts with restructuring as a last resort — to managing and resolving unsustainable sovereign debt burdens? Third, and the overriding question: Could changes in the international financial architecture — particularly to the incentives for and constraints on financing and restructuring — make the global economy and financial system more robust, while reducing the collateral damage from debt crises? Author Biography Susan Schadler’s research in international economic governance builds on her more than three decades of experience at the IMF. Her current research interests include the sovereign debt crisis, global capital flows, global financial institutions and growth models for European emerging market economies. From 1999 to 2007, Susan was the deputy director of the IMF’s European Department, where she served as the organization’s lead oversight for Turkey, the United Kingdom and central Eastern Europe. She also lead several research teams, focusing on Europe’s role in the global economy, economic choices of new European Union member states and institutions of European governance. Prior to joining the IMF’s European Department, Susan worked in the organization’s policy development and review department, where she oversaw lending operations for Russia, other Commonweath of Independent State countries, Turkey and South Africa. She was also responsible for creating a division that carried out the IMF’s ex post evaluation of lending to low- and middle-income countries. Susan is a former international economist for the US Treasury Department and a former visiting researcher at St Antony’s College at the University of Oxford. She is currently a non-resident senior fellow with the Atlantic Council in Washington, DC and on the advisory council of the Center for Social and Economic Research in Warsaw, Poland.
3 Because the restructuring issues arising in low-income countries proceed through a distinct institutional framework, focused particularly on rescheduling official lending, it will not be covered in the conference.
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Conference Committee PROGRAM COMMITTEE Chair
Susan Schadler, Senior Visiting Fellow, CIGI
Committee
Thomas Bernes, Executive Director, CIGI Jack Boorman, IMF (retired) James Haley, Director of Global Economy Program, CIGI Paul Jenkins, Distinguished Fellow, CIGI Fred Kuntz, Vice President of Public Affairs, CIGI Lee Price, Deputy Director for Research Programs, INET Brenda Woods, Conference Coordinator, CIGI
Conference Logistics
Anne Blayney, Event Coordinator, CIGI
CIGI CONFERENCE SUPPORT
Carol Bonnett, Managing Editor, Publications Greg Brennan, Director of Facilities Chantal Bugeja, Reception Matthew Bunch, Publications Coordinator Steve Cross, Media Designer Brandon Currie, Online Content Editor Kevin Dias, Communications Specialist Colleen Fitzpatrick, Community Relations and Events Manager Jennifer Goyder, Publications Editor Robert Harvey, Facilities Assistant Declan Kelly, Communications Specialist Jennifer Kelly, Event Coordinator Edmond Kwan, Network and System Administrator Kelly Lorimer, Public Affairs Coordinator Neil Sarginson, Director of Information Technology Natasha Scott, Web Developer Gloria Song, Event Coordinator Som Tsoi, Digital Media Manager Kris Young, Multimedia Editor
CIGI would like to thank the volunteers for their time, enthusiasm and support.
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Frequently Asked Questions SHUTTLE SCHEDULE CIGI is providing shuttle service to/from your hotel during the conference. If you have any issues with the shuttle schedule please contact: Anne Blayney on her mobile phone at 1 519 498 3405. Friday, February 24, 2012 Time
Description
Notes
18:00
Shuttle from Waterloo Hotel to Langdon Hall
Cocktail reception and registration at Langdon Hall begins at 18:30.
21:30
Shuttle from Langdon Hall to Note: Should you wish to extend Waterloo Hotel your evening or return before the scheduled shuttle, please see reception to arrange alternate transportation.
Saturday, February 25, 2012 Time
Description
Notes
8:00
Bus shuttle from Langdon Hall to CIGI
Breakfast will be available at your hotel in the morning prior to departure. Registration at CIGI will be open from 8:30 to 9:00.
17:30
Bus shuttle from CIGI to Langdon Hall
Cocktail reception at Langdon Hall begins at 19:00.
18:30
Shuttle from Waterloo Hotel to Langdon Hall
Cocktail reception at Langdon Hall begins at 19:00.
22:00
Shuttle from Langdon Hall to Note: Should you wish to extend Waterloo Hotel your evening or return before the scheduled shuttles, please see reception to arrange alternate transportation.
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SOVEREIGN DEBTORS IN DISTRESS ARE OUR INSTITUTIONS UP TO THE CHALLENGE?
Sunday, February 26, 2012 Time
Description
Notes
8:00
Bus shuttle from Langdon Hall to CIGI
Breakfast will be available at your hotel in the morning prior to departure.
14:00
Shuttles to airport/other locations
All other transportation details can be found in your logistics summary, as arranged by Anne Blayney.
Wireless Internet Access at CIGI Wireless Network Name: CIGIMAINGUEST Password: inet2012 EVENT LOCATION The Centre for International Governance Innovation 57 Erb Street West Waterloo, ON N2L 6C2 tel: 1 519 885 2444 fax: 1 519 885 5450 HOTEL INFORMATION Langdon Hall 1 Langdon Drive Cambridge, ON N3H 4R8 tel: 1 519 740 2100 www.langdonhall.ca
Waterloo Hotel 2 King St. North Waterloo, ON N2J 2W7 tel: 1 519 885 2626 www.thewaterloohotel.ca
CIGI CONTACTS For assistance with travel, accommodations or general inquiries please contact: General Inquiries and Programming
Travel Inquiries and Dietary Restrictions
Brenda Woods Conference Coordinator Mobile phone: 1 519 589 2840 Email: bwoods@cigionline.org
Anne Blayney Event Coordinator Mobile phone: 1 519 498 3405 Email: ablayney@cigionline.org
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About CIGI The Centre for International Governance Innovation is an independent, non-partisan think tank on international governance. Led by experienced practitioners and distinguished academics, CIGI supports research, forms networks, advances policy debate and generates ideas for multilateral governance improvements. Conducting an active agenda of research, events and publications, CIGI’s interdisciplinary work includes collaboration with policy, business and academic communities around the world. CIGI’s research programs focus on four themes: the global economy; environment and energy; global development; and global security. CIGI was founded in 2001 by Jim Balsillie, then co-CEO of Research In Motion, and collaborates with and gratefully acknowledges support from a number of strategic partners, in particular the Government of Canada and the Government of Ontario. Le CIGI a été fondé en 2001 par Jim Balsillie, qui était alors co-chef de la direction de Research In Motion. Il collabore avec de nombreux partenaires stratégiques et exprime sa reconnaissance du soutien reçu de ceux-ci, notamment de l’appui reçu du gouvernement du Canada et de celui du gouvernement de l’Ontario. For more information, please visit www.cigionline.org.
About INET The Institute for New Economic Thinking (INET) was created to broaden and accelerate the development of new economic thinking that can lead to solutions for the great challenges of the 21st century. The havoc wrought by our recent global financial crisis has demonstrated the deficiencies in our current economic theories and shown the need for new economic thinking. INET is supporting this fundamental shift in economic thinking through research funding, community building, and spreading the word about the need for change. We already are a global community of thousands of new economic thinkers, ranging from Nobel Prize winning economists to teachers and students who have emerged out from the shadows of prevailing economic thought, attracted by the promise of a robust economic discourse. Our mission is to nurture a global community of next-generation economic leaders, to provoke new economic thinking, and to inspire the economics profession to engage the challenges of the 21st century. For more information, please visit www.ineteconomics.org.
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SOVEREIGN DEBTORS IN DISTRESS ARE OUR INSTITUTIONS UP TO THE CHALLENGE?
Program Masthead CIGI Managing Editor, Publications CIGI Publications Editor CIGI Publications Coordinator CIGI Media Designer
Carol Bonnett Jennifer Goyder Matthew Bunch Steve Cross
Conference COMMUNICATIONS
Declan Kelly dkelly@cigionline.org (1 519 885 2444 x 356)
INET Senior Editor and Director of Communications
Eric J. Weiner ejw@ineteconomics.org (1 917 502 9449)
CIGI Public Affairs Coordinator
Kelly Lorimer klorimer@cigionline.org (1 519 885 2444 x 265)
CIGI Communications Specialist
CIGI EXECUTIVE Executive Director Vice President of Programs Vice President of Government Affairs Vice President of Public Affairs
Thomas A. Bernes David Dewitt Mohamed Hamoodi Fred Kuntz
INET Executive Executive Director Chief of Staff Deputy Director of Research Programs
Robert A. Johnson BJ Greenspan Lee Price
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Wireless Network Name (SSID)
CIGIMAINGUEST
Hotspot Log In Information
(Browser Window) Password
inet2012
Cert no. SW-COC-002478
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