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A Role for Legitimacy in Sovereign Debt: A Review Essay on Odette Lienau, Rethinking Sovereign Debt, 2014

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  • Herman Barry

    (The New School, Milano School of International Affairs, Management and Urban Policy, New York, NY, USA)

Abstract

The book under review seems especially relevant to the intergovernmental policy dialogues that have recently focused on how creditors and a borrowing government should vet sovereign borrowing, and how to hold the lender and borrower accountable for their decisions. The book seeks to specify under what circumstances, if any, there are limits to the legal obligation to repay a sovereign loan. While repayment is always required except in cases of sovereign insolvency when it is just not possible, there have been exceptions to absolute repayment obligation in practice and in legal theory. This review builds on the author’s analysis of determinants of illegitimacy (which would remove the obligation to repay) in order to examine why governments in fact repay their loans, why the loss of access to credit makes repudiation of odious loans rare, and how if enforcing the obligation to repay were restricted to “responsible” lending and borrowing under internationally agreed terms, it could advance socially and environmentally sustainable development, while maintaining normal financial market activity of sovereigns. Finally, complementing a loan-by-loan approach, this paper calls for an internationally concerted process for more effectively and fairly resolving sovereign insolvencies.

Suggested Citation

  • Herman Barry, 2016. "A Role for Legitimacy in Sovereign Debt: A Review Essay on Odette Lienau, Rethinking Sovereign Debt, 2014," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 6(3), pages 219-241, December.
    • Handle: RePEc:bpj:aelcon:v:6:y:2016:i:3:p:219-241:n:3
    DOI: 10.1515/ael-2015-0017
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    References listed on IDEAS

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    1. Ugo Panizza & Federico Sturzenegger & Jeromin Zettelmeyer, 2009. "The Economics and Law of Sovereign Debt and Default," Journal of Economic Literature, American Economic Association, vol. 47(3), pages 651-698, September.
    2. Herman, Barry & Ocampo, Jose Antonio & Spiegel, Shari (ed.), 2010. "Overcoming Developing Country Debt Crises," OUP Catalogue, Oxford University Press, number 9780199578795.
    3. Porzecanski, Arturo C., 2010. "When Bad Things Happen to Good Sovereign Debt Contracts: The Case of Ecuador," MPRA Paper 20857, University Library of Munich, Germany.
    4. Yulia Sinyagina-Woodruff, 2003. "Russia, Sovereign Default, Reputation and Access to Capital Markets," Europe-Asia Studies, Taylor & Francis Journals, vol. 55(4), pages 521-551.
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