64 Pages Posted: 30 Sep 2013 Last revised: 4 Jul 2016
Date Written: 2013
The Greek debt crisis prompted EU officials to embark on a radical reconstruction of the European sovereign debt markets. Prominently featured in this reconstruction was a set of contract provisions called Collective Action Clauses, or CACs. CACs are supposed to help governments and private creditors to renegotiate unsustainable debt contracts, and obviate the need for EU bailouts. But European sovereign debt contacts were already amenable to restructuring; adding CACs could make it harder. Why, then, promote CACs at all, and cast them in such a central role in the market reform initiative? Using interviews with participants in the initiative and those affected by it, as well as observations at policy and academic meetings, we attempt to shed light on the puzzle and draw implications for the role of contract techniques in market construction.
Keywords: legal theory of finance, Eurozone, sovereign debt, collective action clauses
JEL Classification: F34, F55, F65, G15, G20, G28, H63, H81, K2, N20, P16, P43, P48
Suggested Citation: Suggested Citation
Gelpern, Anna and Gulati, G. Mitu, The Wonder-Clause (2013). Journal of Comparative Economics, Vol. 41, pp. 367-385, 2013. Available at SSRN: https://ssrn.com/abstract=2332296