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William Rhodes, advisor to Citigroup chief executive Vikram Pandit and recently retired former board member of the Institute of International Finance, says the European Union should be wary of trying to resurrect a sovereign debt restructuring mechanism (SDRM) in the midst of a still unfolding crisis because it would have such a destabilising effect on the sovereign capital markets. Rhodes quotes the case of Ireland, where 10-year bond yields rose more than 200 basis points within the space of two weeks after German policymakers began talking up such an approach, forcing the government to accept a bailout from the EU and the IMF.
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