On the Record

Restructuring Sovereign Debt

Lex Rieffel

Karen Grigsby Bates:

…Joining us now from New Orleans to discuss Baker’s trip is Lex Rieffel, a guest scholar at the Brookings Institution and author of “Restructuring Sovereign Debt: The Case for Ad-Hoc Machinery.”

Hi, Mr. Rieffel.

Lex Rieffel: Hello.

Karen Grigsby Bates: Tell us, when Baker set off on this trip, France, Germany and Russia had just learned that they were barred from bidding on certain US-financed reconstruction contracts for Iraq. Some said they might refuse to help the US on this debt issue. So how did Baker persuade them to cooperate? Was there any payback there?

Lex Rieffel: In my opinion, they didn’t have much choice. These obligations stand in the way of doing new business with Iraq, with the new government of Iraq. And it’s in everybody’s interest to get them sorted out, to get them resolved, to get them settled, so that new business can be done.

Karen Grigsby Bates: How did the fact that, for these countries, most of them might never get their money back play into their decision?

Lex Rieffel: Well, I think you’re exaggerating the situation a bit, because if you look at how these kinds of situations have been settled and resolved in the past, there are very few cases where absolutely nothing has been gotten. …

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