Wednesday, June 18th 2014 - 07:45 UTC

IMF concerned about 'wider systemic implications' of the US Supreme Court decision on Argentina

The International Monetary Fund is “concerned about wider systemic implications” the ruling by the US Supreme Court could prompt following its decision not to consider Argentina’s appeal aimed at staving off a default.

“We now have a glimpse of the sovereign debt world after Argentina,” said sovereign debt expert professor Anna Gelpern.

 According to an IMF spokesman that was quoted by Argentina’s state-run agency Telam, the credit organization is “carefully considering” Monday’s ruling. “As we have previously said, we are worried about possible wider systemic implications,” the official explained.

The IMF has long warned about potential risks, and the consequences, that a country restructuring its sovereign debt could face if a New York tribunal issues a final judgment on the case.

Last year, the IMF warned that if Argentina lost its case against creditors, the case could set a precedent that gives holdouts outsized power over nations struggling to pay back their debts.

That, the IMF warned, could undermine sovereign debt restructurings around the globe. Cutting the amount of debt owed to creditors is a last-chance emergency measure sometimes needed to prevent the collapse of entire economies.

“We now have a glimpse of the sovereign debt world after Argentina,” said sovereign debt expert and Georgetown University law professor Anna Gelpern. “This world is fraught with uncertainty, perhaps more so than it has been since the early 1990s.”

Ms. Gelpern said the IMF, the Group of Seven leading industrialized economies and others will have to rethink their reliance on sovereign immunity for getting restructurings done and courts around the globe will be forced to resolve conflicts between the Argentina legal case and their own law on sovereign debt.

Financial markets are being forced to write new contracts that avoid complicated fights that leave creditors and borrowers in legal limbo for years.

Traditionally if a country can’t pay its debts, the IMF has only considered forcing a debt restructuring as a condition for an emergency fund loan. Now, it is considering offering an alternative: extending bond maturities.

“While bail-in measures would be voluntary (ranging from rescheduling of loans to bond exchanges that result in long maturities), creditors would understand that the success of such measures would be a condition for continued Fund support for the adjustment measures,” the fund said in its 2013 paper on restructuring.

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1 LEPRecon (#) Jun 18th, 2014 - 08:23 am Report abuse
The IMF should realise that allowing Argentina to get away with this would be catastrophic on international money markets.

If Argentina had negotiated it's debt restructuring in good faith in the 1st place, they wouldn't be where they are today. But Argentina dictated what they were willing to pay, and some of the people they owed money to weren't going to let them get away with it.

No one forced Argentina to borrow the money. No one forced Argentina to sign the deal giving NY courts jurisdiction over this. They did it.

Everything that has happened in Argentina is the fault of Argentina. The fault of successive corrupt governments and a people too lazy or complacent to do anything about them.

If they default again, then tough luck, so be it. They brought it on themselves.

However, there is still time to negotiate an acceptable repayment plan with those that they owe money to which would prevent a default. The only real barrier to this being done is the Argentine governments arrogance, and their inability to abide by agreements and treaties that they have signed.
2 reality check (#) Jun 18th, 2014 - 08:58 am Report abuse
What implications?

I thought they waived their sovereign immunity?

Jesus Christ, what is the point of having contract laws and legal safeguards, if your going to whine every time they are enforced?

They issued these bonds under NY legal jurisdiction and that jurisdiction has ruled on the matter. Simple as that! what's all the fuss about?

Frankly I find it disturbing the way that some of these people seek to override judicial process with economic necessity. What making a profit absolves you from law?

If you are not prepared to abide by a contract, don't fucking sign it!!!!!!!!
3 yankeeboy (#) Jun 18th, 2014 - 09:25 am Report abuse
The IMF wants to set up an International Tribunal that will manage sovereign defaults.
They've been trying for years to get the members to vote on it but the “developing” nations don't want to give up “sovereignty” and be subjected to the “whims” of a foreign body,
This is a way for the IMF to get what it wants.
Wait and see.
4 willi1 (#) Jun 18th, 2014 - 09:41 am Report abuse
the imf is good for helping criminal governments to go bankcrupt and leave private people behind and letting them lose their money.
they want that a majority of bondholders shall be able to accept a debt restructuring like it was practiced by arg with 70 % loss and no interest. WHO is the majority?: FUNDS and BANKS who have made their big deal when buying the bonds on the first day. they have nearly no loss or even a much smaller than the private people.
IMF go to hell!
5 falklandlad (#) Jun 18th, 2014 - 10:26 am Report abuse
@ #1 - a great post. Argentina only has to look in the mirror and see who is to blame.
6 bushpilot (#) Jun 18th, 2014 - 12:11 pm Report abuse
The IMF is run by a bunch of irresponsible pseudo-intellectual imbeciles.

I don't mean to sound like a simpleton but:

If a country has to borrow money, including the U.S., that means, “they don't have any money”. If they did have money, they'd not need to borrow.

If they borrow money, that borrowed money has to “make money”. This is because, “that country has no other money to pay this debt back.” If they had other money, they'd not have to borrow. So, I repeat, “the borrowed money must create a net gain in revenue or the country will not be able to pay back the loan”. Do you hear that IMF?

Hence, the eternal need for debt restructuring. Hence, job security for the IMF.

Moral of the story, “don't borrow unless it will clearly pay for itself and raise GDP noticeably”. And, “don't listen to a word of what the IMF says”, that is a productive first step.
7 The_TroLLing_Stone (#) Jun 18th, 2014 - 12:40 pm Report abuse
@1

And using the same philosophy then don't get mad when terrorist blast through Europe and the USA, because you deserve every single terrorist attack that has and WILL occur.

Everything that happens to you is YOUR FAULT. You went and bombed the Arab, you got into their business for decades, you were too lazy to do anything to change your governments, so stop crying “we are victims we don't deserve terrorism”.

You DO deserve it.
8 Briton (#) Jun 18th, 2014 - 12:52 pm Report abuse
Anna
perhaps a haircut would help..lol
9 Steve R (#) Jun 18th, 2014 - 01:02 pm Report abuse
@7
So you are saying that innocent people deserve to die, to be maimed, crippled! What planet do you live on I wonder? because you are certainly not human
You seem to think that some how Argentina is exempt from terrorist attacks! Sorry but I do believe you are a Catholic country and there are certain elements out there who hate you simply for that reason.
But there again if you do get attacked according to you thats ok
10 reality check (#) Jun 18th, 2014 - 01:46 pm Report abuse
How the f.....? did we get from, no one forced them to borrow the money, to, you deserve every terrorist attack.

Someone explain please, because his logic is beyond my capacity of reasoning!

Is this what passes for intelligence where he comes from?
11 Conqueror (#) Jun 18th, 2014 - 02:58 pm Report abuse
@7 There is a simple response to your scenario. We kill. Every terrorist should be made to understand, by example, that they will not survive. Moreover, our action should not be limited to immolating the terrorists. We should go back to their “home” states and wipe out their “support”. A good example is the terrorism that issues from so-called “palestinians”. These islamic arabs needs to be removed from Israeli territory to where they were supposed to be. Jordan! If terrorists operating in Europe turn out to be “palestinians”, then we need to move on Gaza and the West Bank. The “palestinians” have a choice. Repudiate terrorism and move to a new homeland. Or get immolated.

And it's totally justifiable. There is no room for selfish activities. Jihadists and argieland are basically the same. Selfish. “We want this and we will have it. Whoever is killed or injured on the way. We will not compromise”. A plague that can be likened to bacteria. How do we deal with bacteria? We exterminate them.
@10 TiT is an anarchic activist. Nothing he ever says is constructive. He comes from a “country” where the culture is based on cheating, lying and stealing. And, to add to it, he's a juvenile delinquent.
12 Clyde15 (#) Jun 18th, 2014 - 07:09 pm Report abuse
#1
Deviation again....dodge the subject in discussion.

Everything that happens to you is YOUR FAULT.
Even YOU is our fault for being a loving caring people

Tonight's BBC News Iraq PM calls for US air strikes against jihadi insurgents. An Arab calling for help against Arabs ?

If you were so damn smart you would realise that it is a religious war -not secular. There are any amount of non Arab religious fanatics who are in this group, quite happy slaughtering Arabs, or anyone they don't like which means non-sunnis. Yes they would like to destroy western civilization and go back to the 10th century Don't think your precious country would be free from any attacks.Pakistan is not an Arab country and look at the trouble they are having.

The world is a much larger an intricate place than the little spot next to the Andes, where you live
13 Don Alberto (#) Jun 18th, 2014 - 10:19 pm Report abuse
As we all know Argentina is extremely corrupt (# 106 on the list).

It seems that a number of top brass and “experts” in IMF are on the take too.

Everybody with even a slight knowledge of national debt know that the Griesa/SOCUS rulings will simply influence future restructuring of sovereign debt. That part of history won't repeat itself.
14 The_TroLLing_Stone (#) Jun 18th, 2014 - 10:33 pm Report abuse
@9

Yes, I am saying that.

Argentina in a very pathetic and cowardly decision participated in the First Gulf War. So we deserved the attacks that followed for getting in business that was none of ours.

I find it so hypocritical that you think somehow economics and geo-politics deserve different treatment by the people that are “victimized”. WHY?

Lets put it this way.

Argentina VICTIMIZED the bondholders. I am sure every single one of you here would agree with that statement.

So what recourse do the victims have when they are screwed over by a NATION, a GOVERNMENT? Not much recourse huh, individuals vs. a government? The only thing they can do is somehow make it very uncomfortable for that government, in any way possible, EVEN IF IT MEANS MILLIONS THAT HAD NOTHING TO DO WITH THE GOVERNMENT'S ECONOMIC DECISIONS, suffer, and possibly die. You could argue they deserve to suffer because those millions voted for such government that later cheated them.

The same concept applies in geo-politics.

The United States, United Kingdom, and frankly many other European countries VICTIMIZED the Arabs for the last 150 years: with ruthless colonialism from French Algeria to Italian Libya to British Egypt, you STOLE their treasure (much sits in your museums or even in your avenues and boulevards to this day), you CARVED up their nations into illogical states that had no regard for their ethnic, cultural, and religious history (because of course they are inferior to the European), you have repeatedly bombed them, killing hundreds of thousands of innocent women and children from above, like true cowards.

So what recourse do the victims have when they are screwed over by your NATIONS, GOVERNMENTS? Not much recourse huh, individuals vs. a government? The only thing they can do is somehow make it very uncomfortable for that government, in any way possible, EVEN IF IT MEANS MILLIONS THAT HAD NOTHING TO DO WITH THE GOVERNMENT'S WAR DECISIONS, suffer, are terrorized, possibly die...
15 ChrisR (#) Jun 18th, 2014 - 10:52 pm Report abuse
“While bail-in measures would be voluntary (ranging from rescheduling of loans to bond exchanges that result in long maturities), [creditors] would understand that the success of such measures would be a condition for continued Fund support for the adjustment measures,” the fund said in its 2013 paper on restructuring.

This professor should take a 75% haircut herself, it would remove some of the pressure on her brain and perhaps she could start using clear language instead of this rubbish. What or who are the [creditors] (my brackets? It is the defaulters who need to understand the conditional support for the loans, not the creditors to the so called sovereign nations.

@ 6 bushpilot

I take it you have never used finance then? Not even ZERO cost finance which allows you to do all sorts of things without using your own money?

I am a reasonably wealthy man, all because I worked harder at school and harder AND smarter than anyone else in my peer group when I was employed: it got even better when I was self-employed and running my own businesses and was able to access financing on a larger scale.

The UK (because we always pay back our debts) can access the finance markets at a very low rate. They did this when we leant money to Eire when they were in trouble AND COULD NOT GET FINANCE at any sensible rate. We did of course charge them a little more than it was costing us so both parties benefitted. Eire were pleased and happy that we bailed them out at a reasonable rate (for them): it also helped our exports to them of course.

That is just one example of how finance operates. It’s a bit more complex than whether you have money or debts before you have “loans” shall we say?

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