Reported in today’s Les Echos (p. 29): the planned European mechanism for restructuring sovereign debt, which should be approved in March for implementation in 2013.
The clause highlighted by the article introduces loss-sharing: if a State defaults, (private) bondholders will no longer be able to count on unlimited public liability once States have borrowed beyond their means. In practice, government bonds will therefore no longer be “guaranteed”…
A “revolution” for investors, but above all for States, beyond the rating agencies’ “indicators”, because the assessment of public policies will be reflected in investors’ confidence – or lack of it.
A fine change challenge for public finances!
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