Sovereign Debt

In this chapter we discuss the social and political resistance against the brutal neoliberal policies that have been imposed on Greece since May 2010 and offer suggestions how to relieve the societal burden these draconian measures have placed on Greek society. To begin, we set out the situation of the labour and other movements from the strikes of the trade unions to the assemblies of the squares and the occupation movements. Further, we analyze the so-called education reforms that have been instituted since the crisis began, and we discuss teachers' resistance to the changes that have been imposed on them as a result of the crisis. Furthermore, we analyse the effects of the crisis on the working class movement and any kind of social representation as a consequence of the attack of Capital that began in the aftermath of the structural crisis of the 1970s. Finally, we offer some considerations about the necessary restructuring of the labor movement with regard to its structure and aims. This restructuring is absolutely necessary for a more effective resistance and its role in building for a better future.

The paper examines two related subjects: First, the strictly class character of Greek public debt restructuring, according to its design and consequences, which determined its failure to reduce the level of the debt. The importance of this discussion is highlighted by recent considerations about a new haircut or a new rescue loan to Greek government1. The contradicting plans make clear that sooner or later there will be a new round of crisis with negative implications to Greek working class and people.
Second, five concrete arguments at favor of the cessation of payments and abolition of Greek public debt. In the following lines it is shown the huge responsibility of European Union to the deterioration of sovereign debt crisis in Greece. The damaging role of EU in the Greek sovereign debt crisis, which operated as protector of bankers and creditors and led to the current deadlock was described on October 12, 2012 by Financial Times with the following: “Although IMF staff wanted early on to consider restructuring sovereign debt as part of the debt rescue, they were overruled by Eurozone governments and the ECVB which feared for the health of European banks holding Greek bonds, until a writedown became inevitable. A recent internal review of the conditions the IMF attached to lending admitted: ‘Institutional constraints in the euro area occasionally limited alternatively policy options that could otherwise have been considered – notably, debt restructuring to strengthen debt sustainability’”. Consequently, any solution in direction of reducing the debt and relieving of working class has as precondition the conflict with creditors which now, by big majority, are official (EU members, ECB, national central banks and IMF) and not private.

On 2016 finished the period of contraction of the economy which started on 2008, having reduced the GDP by 26,4%.
On August of 2018, finished the third Adjustment Programme that accompanied the third loan agreement of 2015.
Main characteristics of this new period:
After 2017: annual growth rate of 2%
Return to the markets for refinancing of the debt with the issue of 4 news bonds, among them one of 10-year, which is the first one after the 2010 when Greece was excluded from bond markets
Reduction of borrowing cost for the 10year old bonds in secondary market from 3.875% (March of 2019) to 1.5% (October of 2019)

The crisis of 2008 was a structural crisis of capitalist mode of production.
It took the form of financial crisis because of the special role that financial capital is playing in the nowadays economies, after the crisis of ‘70s.
In Greece the crisis was expressed as a sovereign debt crisis because of chronic and intrinsic imbalances of the accumulation process. Greek capitalism was surpassing these weaknesses through an increased role of the state, which was covering the deficiencies of private capital.
Its socially violent and economically unprecedented form was the result of the common currency, which didn’t leave any room for an adequately adjusted monetary policy (i.e. devaluation of exchange rate to boost the exports). As a result, the only way forward was the internal devaluation (reduction in wages, flexibility in working relations, etc.) which sent the bill to the working class.

En Agosto del 2018, al cabo de los diez años desde el estallido de la crisis económico-financiera, se completaron los programas estructurales de reajuste (Memorándo of Understanding) que los acreedores impusieron a Grecia. Típicamente pues, llegamos al fin de la crisis. Durante este período tuvimos tres "préstamos de rescate", acompañados por tres programas de reestructuración, caracterizados como los más bárbaros que hayan sido impuestos en territorio europeo 1. Para justificar la subordinación de Grecia al control de los acreedores bajo la iniciativa del Fondo Monetario Internacional (FMI), se tergiversaron los datos estadísticos sobre la deuda pública y del déficit presupuestario 2 , de manera que la situación pareciera demasiado dramática y así justificar el inicio de una terapia de choque. De esta manera, una crisis que aunque era grave y estructural porque revelaba los límites del capitalismo como forma de producción, pero que pudo haber tenido salidas con las medidas habituales y más suaves, como lo ha sido en el pasado, adquirió un carácter apocalíptico.

The completion of ten years since the onset of the 2008 crisis coincided with Greece's exit from the three funding programs (2010, 2012 and 2015) which would allegedly face the debt crisis in Greece. Thus, on 20 August 2018, not only the Greek government but also the lenders celebrated the end of the last program and the return to “regularity”.
In this article it is argued that, contrary to what is officially stated, firstly, Greece comes out of the fiscal adjustment programs in a worse position than its financial situation before the crisis. The adoption of the programs made the Greek economy more vulnerable and weaker. Secondly, the situation of workers and all the working classes has worsened rapidly and in an unprecedented way. The shock-therapy that has been implemented in Greece for eight whole years and with the responsibility of all political parties (social democratic PASOK, right New Democracy, left SYRIZA and extreme right LAOS and ANEL) has worsened disproportionately the position of the poorest strata.

Creditor-debtor engagement in one form or another has been a feature of many sovereign debt restructurings. In some cases, debtor-creditor engagement has been formalized and took the specific form of creditor committees. Views differ considerably on the merits and demerits of CCs, and on the level of prescription and detail that is desirable from a policy perspective. The incentives of the main actors in sovereign debt also differ with respect to creditor engagement, particularly as regards ex ante contractual clauses. The article focuses on the possible content of creditor-debtor engagement. Creditor-debtor engagement can take four main forms: (i) the insertion ex ante of contractual clauses in bond documentation for creditor committees (CCs); (ii) ex ante best practices for formal creditor committees; (iii) ex ante best practices for engagement between creditors and debtors or (iv) ex post agreement between the debtor and creditor on creditor engagement or CCs.

This article analyzes the implementation in France of an international bureaucracy standard for debt management in the early 2000s. Shaped by international organizations to send a credible message to financial investors concerning the technicization and depoliticization of debt, the agency format was redesigned to suit the specificities of the domestic government. Far from being an example of the rational, voluntary depoliticization automatically proposed by the model, the controversies raised by the design of Agence France Trésorprovide new insights into the demands of the global capital environment, the desire for reform of political representatives, and the political capacities of the Treasury Department and civil servants.

In this study global and national variables that affect the sovereign Credit Default Swaps (CDS) spreads for Turkey are examined. The study utilises monthly time-series data, spanning from August of 2009 to September 2018. Empirical analysis is done in two steps: In the first step, the causality relationships between related variables are investigated by the Granger causality test. In the second step, the effect of symmetric and asymmetric spillover effects on sovereign CDS spread is determined. The findings show that both national and global shocks are relevant for Turkey' sovereign CDS spreads volatility, but national variables tend to have a greater impact. Furthermore, there exist mean asymmetric effects for external fragility, domestic interest rate and the VIX variables. It is tested that sovereign CDS spreads react more sharply to domestic interest rates and VIX bad news than a positive shock of equal size. Generally, both uncertainties in global conditions and the relatively high need for external borrowing of Turkey necessitates a multi-faceted policy-making and management process.

This working paper presents a conceptual framework for GEOFIN’s analysis of the financialization of the state in eleven European Union member states in postsocialist East-Central Europe (ECE-11) and operationalizes it for the purposes of analysis of internationally comparable secondary quantitative data. The first half of the paper  develops a systemic, processual and spatial approach to the financialization of states. The second half of the paper identifies key dimensions of state financialization processes, their forms that scholarship discussed as prevalent in East-Central Europe and/or (semi-) peripheries, and their potential indicators  in secondary quantitative  data.  The following dimensions of state financialization are covered: monetary and fiscal policies (including sovereign debt); public-service provision; lawmaking and regulation; and investment policy.

La investigación tiene como objetivo analizar el estado del debate contemporáneo sobre los mecanismos de reestructuración de deudas soberanas. En función de ello, el artículo comienza por desentrañar las principales directrices sostenidas por las propuestas que tuvieron mayor impacto político-económico desde la inauguración del debate, con especial atención a los desarrollos reportados en los años posteriores. Identifica también a los promotores de cada una de ellas y los argumentos que esgrimieron –y esgrimen hoy en día– en torno a los problemas que condicionan a todos los procesos de reestructuración de deuda soberana. Finalmente, el trabajo culmina con reflexiones conclusivas.

Unlike the popular narrative, which suggests that the Greek debt crisis was the result of lavish spending, this article demonstrates that the 'crisis' was generated by a transformation of purely private debt into public debt. This finding is supported by the preliminary report of the Greek Parliamentary Committee on the Truth of the Greek Debt, which clearly demonstrated the exponential increase of private debt in Greece risked the collapse of the private financial institutions exposed to it, namely Greek, French and German banks. This prompted the three nations to exert pressure on the Greek government to recapitalise and nationalise Greek banks through Eurozone and IMF funding. This funding, which came to be known as 'bailout for Greece' was nothing more than a salvation of private banks through EU taxpayers' money, only 5% of which went into the Greek economy. The article shows that the process by which the debt was transformed, as well as the post-crisis bailout were odious, illegal and illegitimate and the ensuing debt itself was unsustainable and wholly against fundamental human rights.

On Feb. 19, 2020, the IMF declared that Argentina’s debts were no longer sustainable and called upon bondholders to help resolve the crisis. A schedule for the restructuring of Argentina’s external debt has been announced by the Argentina Ministry of Finance on Jan. 29, 2020. According to the Ministry, Argentina plans to launch a debt restructuring offer in the second week of March and execute the offer by the end of March.

This short essay provides an overview of the intricate challenges that Argentina would be facing in a potential restructuring of its sovereign debt obligations, with a focus on the legal aspects. After mapping the respective debt instruments, which include domestic debt, international sovereign bonds, as well as loans from international financial institutions, I turn to the key legal obstacles when it comes to the (unilateral) restructuring.

The paper posits that the most significant legal risks are likely to occur with respect to international bonds and disruptive legal actions taken by their holders. Uncooperative creditors may engage in holdout tactics with the goal of obtaining a better settlement than their peers by refusing to settle and ultimately launching litigation proceedings in foreign courts. The latest type of Argentine bonds ("Macri bonds") include modern, fully-aggregated, single-limb Collective Action Clauses (CACs), which are powerful in ameliorating such holdout inefficiencies. However, several older bonds ("Kirchner bonds") feature an outdated model of CACs, and generally afford stronger enforcement rights to bondholders. Unsurprisingly, creditor holding Kirchner bonds have already formed committees to leverage their negotiation position. Another related difficulty that this paper reviews arises from the requirement in Argentina's newer ("Macri") bonds that a restructuring offer must be "uniformly applicable" for all affected series of bonds. Given the two different sets of bond contracts involved, this requirement may lead to complex transactional and design questions. Finally, with respect to the interpretation of the pari passu clause included in Argentina's bond prospectuses, the essay argues that a recent decision by the Southern District Court of New York significantly reduced the risks of specialized holdouts attacking a majority-approved debt workout.

To be sure, modern sovereign bond restructurings rest on the basic premise of bondholder democracy. In other words, as long as a sufficient majority of creditors accepts a restructuring offer, most legal obstacles can be overcome. However, the entrance of specialized distressed-debt managers the market suggests that some investors will gamble for a better deal, or try to leverage their contractual rights against the country in a classic holdout manner. While Argentina certainly finds itself in a legally superior position compared to its last debt crisis, the country will soon have to sail into choppy legal seas where all sorts of hazards lurk - some of which the country is all too familiar with.

Çalışma, üç bölümden oluşmaktadır. Giriş bölümünün ardından ilk bölümde dünyada yaşanan borç krizlerine ve Türkiye’nin 1900’lü yıllarda yaşadığı borç krizlerine değinilmiştir. İkinci bölümde literatürde yer alan borç krizi tanımlarına yer verilmiştir. Üçüncü bölümde ise, ikinci bölümde belirlenen tanımlamalardan elde edilen borç dinamiklerine ait çeşitli gösterge ve eşik değerler göz önüne alınarak Türkiye’nin borç krizinde olup olmadığı belirlenmeye çalışılmış ve ardından sonuca gidilmiştir.