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

Wednesday, June 18th 2014 - 07:45 UTC
Full article 15 comments
“We now have a glimpse of the sovereign debt world after Argentina,” said sovereign debt expert professor Anna Gelpern. “We now have a glimpse of the sovereign debt world after Argentina,” said sovereign debt expert professor Anna Gelpern.

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.

 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.

Top Comments

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  • LEPRecon

    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.

    Jun 18th, 2014 - 08:23 am 0
  • reality check

    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!!!!!!!!

    Jun 18th, 2014 - 08:58 am 0
  • yankeeboy

    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.

    Jun 18th, 2014 - 09:25 am 0
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