William R. Cline
As part of a deal to tackle
Q. Can you provide an overview of
A. The Argentine default was at the end of 2001 [It officially began its restructuring in 2002]. It involved a deep devaluation from a fixed exchange rate to the dollar and a very confrontational debt default that, by 2005 [when
It is a difference between a confrontational approach in which the debtor asks for a much deeper forgiveness than the creditors think is warranted, and a cooperative approach in which the debtor is saying, "We've got a temporary cash flow problem, but we intend to honor the full value of the debt."
Q. What role did the restructurings play in the recovery of
A. The record for
The gauge that I use as an indication of who did it better is whether they are back in the international capital markets [
Q. What lessons do the Argentine and Uruguayan restructurings hold for
I did an analysis of this a couple of weeks before the 50 percent haircut, and I came to the same conclusion that the new [Greek] Prime Minister,
The Greek deal is pretty much on track. It is important to keep in mind that a lot of the private holders in
Q. If the Greek plan goes forward, how will it compare with that of
A. The Uruguayan exchange offer is not that different in the sense that there were probably a similar proportion of non-participants, about 10 percent or so that did not participate [in the bond swap]. One can anticipate that this time around as well. It is similar in that the creditors are cooperating on a fairly voluntary basis because they think that the relief that is being asked under the circumstances is reasonable.
Q. What is the trajectory for
A. The growth rates that the IMF was using as of midyear -- and they have scaled it down a little bit -- had
A. That is a mixed curse or a mixed blessing. The devaluation can be a stimulus to growth by increasing the export sector, but it also balloons up the local currency cost of the debt that has been contracted abroad. It's highly likely that the net effect [of
That being said,
Q. With yields on
A. The key to the Italian outcome is the willingness of the ECB [
In principle you could have the EFSF [European Financial Stability Facility] essentially do leveraging arrangements that would enable it to have a balance sheet of, say, a couple trillion euros, and that would be enough. The argument is, once it was there, that would solve the problem because the markets would not try to fight against that. So far, there has been an unwillingness to put either
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- Forging a Lasting Peace
- Eurozone Needs Exit Rules
- Euro Zone Rescue: Deja Vu All Over Again
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- European Union Leaders Reach Deal on Greece, but Worries Remain
- EU Leaders Announce New Eurozone Rescue Deal
- Can Europe's Divided House Stand?
- Greece's Youth: 'I Have No Hope'
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- France Teetering on Edge of Financial Precipice
- Why Care About the French Presidential Race
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- The Dying Bear: Russia's Demographic Disaster
- Bulgaria, Romania and Greece Initiate EU strategy for Balkans
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- Turkey's Never-Ending Kurdish Question
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Copyright 2011, Foreign Affairs