Part VI International Monetary Law and the International Financial Architecture, XLI Debt Crises and State Insolvency

Subject(s):

International investment law — Debts

This chapter analyses the institutional frameworks that address debt crises and State insolvencies. Whilst countries can meet outstanding debts in their own currency by fostering inflation, this mechanism is no answer to debts in foreign currencies. The chapter shows how the last two centuries witnessed about ninety cases of State insolvency, moratorium, and default on foreign debt, which include European States such as Denmark, Germany, Greece, and Russia. These events prompted a number of initiatives to ease the burden of debt, especially for the poorer countries. The chapter then discusses two processes of restructuring sovereign debt: the ‘Paris Club’ and the ‘London Club’. And finally, beyond the statutes of international lenders like the International Monetary Fund (IMF) or the World Bank, the chapter reveals that international law offers little conceptual guidance for relief from the perspective of heavily indebted countries.