The bondholder, the sovereign, and the banker: sovereign debt and bondholders' protection before 1914

Esteves, Rui

doi:10.1093/ereh/het016

Cited by 32 publications

(20 citation statements)

References 24 publications

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“…Greece again in 1898 was granted guaranteed bonds corresponding to 19 % of its outstanding debt. However, as the guaranteeing powers imposed a 61 % haircut over the preexisting debt, the share of guaranteed bonds rose to close to half of the new debt stock (Esteves, 2013). These fractions were even higher in the cases of Turkey in 1855 and China in 1895 and are comparable to the contemporary projects for the issue of Eurobonds.…”

Section: Debt Mutualization and Guaranteed Bonds Before 1914mentioning

confidence: 96%

“…In the second half of the nineteenth century these enforcement problems led bondholders to create permanent organizations to overcome collective action problems when negotiating with a defaulting sovereign. The best known of these organizations was the British Corporation of Foreign Bondholders (Mauro et al, 2006;Esteves, 2013). After some defaults, creditors were able to gain access to the revenues assigned for the service of the debt.…”

Section: Debt Mutualization and Guaranteed Bonds Before 1914mentioning

confidence: 99%

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Eurobonds Past and Present: A Comparative Review on Debt Mutualization in Europe

Esteves

Tunçer

2016

Review of Law &Amp; Economics

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This paper reviews the economic and historical literature on debt mutualization in Europe with reference to pre-1914 guaranteed bonds and the current Eurobonds debate. We argue that, notwithstanding the differences in scale and nature, debt mutualization solutions similar to Eurobonds were tried before, and the closest historical examples to the present debate are the pre-1914 guaranteed bonds. We highlight three key characteristics of debt mutualization, which are apparent both in the current debate and in history: moral hazard, debt dilution and conditionality. We show that the fears about short-run dilution and moral hazard were not unknown to pre-1914 market participants. These problems were partly addressed by mechanisms of conditionality such as international financial control. The historical evidence suggests that the dilution of outstanding obligations may be overplayed in the current debate. On the contrary, creditors’ moral hazard (ignored in current debt mutualization proposals) was as problematic as the usual debtor’s moral hazard –especially when the groups of countries guaranteeing the bonds and the creditor nations did not overlap entirely.

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Section: Debt Mutualization and Guaranteed Bonds Before 1914mentioning

confidence: 96%

Section: Debt Mutualization and Guaranteed Bonds Before 1914mentioning

confidence: 99%

Eurobonds Past and Present: A Comparative Review on Debt Mutualization in Europe

Esteves

Tunçer

2016

Review of Law &Amp; Economics

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“…Greece again in 1898 was granted guaranteed bonds corresponding to 19% of its outstanding debt. However, as the guaranteeing powers imposed a 61% haircut, the share of guaranteed bonds rose to close to half of the new debt (Esteves 2013). These fractions were even higher in the cases of Turkey in 1855 and China in 1895 and are comparable to the contemporary projects for the issue of Eurobonds.…”

Section: Table 1 Herementioning

confidence: 96%

Feeling the Blues. Moral Hazard and Debt Dilution in Eurobonds Before 1914

Esteves

Tunçer

2014

SSRN Journal

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Debt mutualisation through Eurobonds has been proposed as a solution to the Euro crisis. Although this proposal found some support, it also attracted strong criticisms as it risks raising the spreads for strong countries, diluting legacy debt and promoting moral hazard by weak countries. Because Eurobonds are a new addition to the policy toolkit, there are many untested hypotheses in the literature about the counterfactual behaviour of markets and sovereigns. This paper offers some tests of the issues by drawing from the closest historical parallel-five guaranteed bonds issued in Europe between 1833 and 1913. The empirical evidence suggests that contemporary concerns about fiscal transfers and debt dilution may be overblown, whilst creditors' moral hazard may be as much of a problem as debtors'.

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“…The prototype of such organizations was the British Corporation of Foreign Bondholders, created in 1868(Esteves 2013;Flandreau 2013). 30 SeeBordo and Murshid (2001) andBa (2017) for further hints in this direction.31 The number of sovereign nations increased over the century until a maximum of 47 on the eve of the World War.…”

mentioning

confidence: 99%

Public Debt Through the Ages

Eichengreen¹,

El-Ganainy²,

Esteves³

et al. 2019

IMF Working Papers

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We consider public debt from a long-term historical perspective, showing how the purposes for which governments borrow have evolved over time. Periods when debt-to-GDP ratios rose explosively as a result of wars, depressions and financial crises also have a long history. Many of these episodes resulted in debt-management problems resolved through debasements and restructurings. Less widely appreciated are successful debt consolidation episodes, instances in which governments inheriting heavy debts ran primary surpluses for long periods in order to reduce those burdens to sustainable levels. We analyze the economic and political circumstances that made these successful debt consolidation episodes possible.

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The bondholder, the sovereign, and the banker: sovereign debt and bondholders' protection before 1914

Cited by 32 publications

References 24 publications

Eurobonds Past and Present: A Comparative Review on Debt Mutualization in Europe

Eurobonds Past and Present: A Comparative Review on Debt Mutualization in Europe

Feeling the Blues. Moral Hazard and Debt Dilution in Eurobonds Before 1914

Public Debt Through the Ages

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