Recent proposals have been put forward to reform the European economic governance, including new arrangements for the management and resolution of possible sovereign debt crises. This note purports to: (a) critically review earlier debates on the reform of the international financial architecture, identifying those elements that could still be relevant for Europe today; (b) discuss recent proposals to establish a restructuring scheme in the euro area.
A formal framework for restructuring sovereign debts in Europe could be counterproductive, especially if it unduly restricts the room for maneuver available to crisis management authorities. In any event, such mechanisms could only be adopted once the existing legacy problems are solved, namely when countries' debt-to-GDP ratios are brought down to sufficiently low levels.
