A Mature Approach: Using a Unilateral or Voluntary Extension of Maturities To Restructure Italian Debt

Abstract

As the Eurozone debt crisis deepens, many European countries must determine how to restructure their debt, should it become necessary. Italy, while faced with a large debt burden, has the opportunity to prevent a future liquidity crisis by extending maturities on its existing debt. Fortunately, Italy has tools it needs to facilitate a voluntary reprofiling. This paper argues that by using the specter of the Greek restructuring and existing Italian law, which permits Italy to extend maturities, Italy can persuade its bondholders to participate in a voluntary exchange.

Keywords: Italy, sovereign debt, liquidity, maturity extension, restructuring