Sovereign debt restructuring in the Eurozone: A polanyian reading of private law enforcement

Abstract

The social protests on the streets of indebted sovereigns in crises across the Eurozone have made debt restructuring an imperative. Further delay in achieving this expeditiously and equitably significantly exacerbates the social costs of crises from which current and future generations will struggle to recover. This article examines the feasibility of the drastic and widespread debt restructuring needed to resolve the problem in the face of existing private law sanctions that protect individual creditor rights. It relies on an analysis of US policy in the transition to a securitized market and of key sovereign debt cases to reveal the historical contingency of private law protections. It concludes by showing that the effectiveness of private law protections have always been constrained by the overriding imperative to achieve debt sustainability with negotiated and consensual workouts. This can be achieved in the Eurozone with statutory constraints on enforcement action pending the settlement of debt workouts as suggested in a recent proposal.

Citation

Thomas, D. (2013), "Sovereign debt restructuring in the Eurozone: A polanyian reading of private law enforcement", From Economy to Society? Perspectives on Transnational Risk Regulation (Studies in Law, Politics, and Society, Vol. 62), Emerald Group Publishing Limited, Leeds, pp. 135-159. https://doi.org/10.1108/S1059-4337(2013)0000062006