By Kevin P Gallagher
Developing a sovereign debt crisis management regime should be at the top of the G20’s agenda.
As Carmen Reinhart and Kenneth Rogoff show in This Time is Different: Eight Centuries of Financial Folly banking crises are often followed by sovereign debt crises. Europe’s debt crisis might be topping the headlines now, but the problem won’t end here.
Reinhart and Rogoff find that the debt/GDP threshold where nations slip into crises has historically been 30-35 per cent of GDP. According to the World Bank more than 60, mostly developing, countries reached that threshold in 2008. A 2009 IMF report, which examined 71 low-income countries, suggested 28 of the poorest nations are at high risk of debt crises. Read more