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Authors Alexis Metzger and Kylee Vaughn are first years majoring in Contemporary European Studies, and have assured admission into the TransAtlantic Masters (TAM) Program through Excel in Europe @ Carolina. They attended “The Politics of EU Debt Management in the EU and Beyond” on November 10, 2016, to learn more about how the EU and other governments manage sovereign debt. The workshop was organized by Dr. Layna Mosley, Professor of Political Science, with the support of CES’ Jean Monnet grant. To learn more about the Excel in Europe @ Carolina program, visit our overview. If you are a UNC student interested in TAM, including the accelerated 5-year BA-MA track, check out the details on how to apply.




Jean Monnet Public Debt Management Workshop

The debt of a country is an issue mostly associated with fiscal policy, one that we may assume is only subject to the rise and fall of economic cycles. However, there is much more to examine when analyzing the patterns and motivations behind nations and their sovereign debt platforms. What effect do politicians have? Elections? What about sovereign law and the fine print of Collective Action Clauses (CAC’s)? What role do the creditors play—and what are they looking for? Can entities even such as pension funds play a role? All these questions were approached and discussed by a notable panel of experts at the conference “Public Debt Management in The World” at the FedEx Global Center in UNC Chapel Hill, as part of the UNC Center for European Studies’ Jean Monnet programming.

Debt management was approached through a variety of lenses by political, economic, and legal experts alike. Despite the differences in specialties and the topics approached, every research question presented was subjected to the central question at hand: how do governments manage their sovereign debt, and what are the consequences of their decisions?

The conference opened up by addressing who the key players in managing sovereign debt are. Though governments choose their overall policy on sovereign debt, it is managed by Debt Management Office (DMO), which, as pointed out by several different conference members, can have a variety of relationships with the political sectors of their nations. It was consistently supported by many that DMOs are most effective when they are both professionalized and centrally organized- though it was contested that it may not be possible for DMOs to be “fully professionalized” or “fully centralized.” Mark Hallerberg of the Hertie School of Governance eloquently approached this issue, outlining a research proposal in which he claimed more professionalization and centralization should improve operational efficiency, have fewer costs to taxpayers. Political autonomy was another widely assumed factor in DMO efficiency—but again, it was asked, is this truly possible?

Further discussion on one nation’s decisions on their debt management was approached by Cameron Ballard-Rosa (UNC), Layna Mosley (UNC) and Rachel Wellhausen (UT-Austin), whose innovative research connected the patterns of bond instability and fluctuation around election periods and global liquidity levels. Their research showed that global market liquidity affects salience of political risks, and had interesting proposals as to how governments should react to this, particularly in pre-electoral stages. Also approaching intergovernmental issues was Giselle Datz, who looked at the role of pension funds and sovereign debt through the example of the UK. Her work showed that pension funds can be worsened by collateral damage of unconventional monetary policies with discernible financial market implications.

But debt management does not have isolated consequences for one nation, it in fact is firmly linked with the decisions of others. Jonas Bunte’s research on the relationship between developed creditors and developing creditors approached this subject—particularly looking at the new market rivalry of Brazil, Russia, India, and China’s loans, also known as BRIC loans. He explained that that organization of the recipient government had a large impact on which type of loan they may choose to take, depending on which suited their nation’s interest the best. In discussion with other experts, an idea emerged that political rivalry between the types of lenders (western, International Monetary Fund, and BRIC) may be another variable in how developing nations choose which one to take, depending on if there are pre-existing allegiances or territorial disputes.

Finally, the topic of law was approached, though even Mark Weidemaier (UNC School of Law) mentioned it was often put on the back burner when considering sovereign debt issues. His research, along with that of Anna Gelpern (Georgetown Law) and Mitu Gulati (Duke University), signified that law and clauses within sovereign bond contracts could carry a heavier impact than originally thought. Both of these research initiatives did not so much analyze the impact of legal clauses, but strongly supported the claim that legal material in bond contracts were not given enough attention. With the growing complexity in sovereign debt relationships, it became clear that it was becoming careless to ignore binding issues within the law.

It is clear that great work and research is being developed to de-mystify the patterns and players involved in sovereign debt management. In a globalized world with interlinked economies, it is absolutely essential to understand what factors contribute to the growing crisis. A nation’s decision to issue debt, include a new CAC clause, or implement sovereign law are not isolated choices; every decision is bound to have international repercussions due to the interconnections. Especially today, with developing nations attempting to catch up to experienced economic rivals, and economic crisis dominating headlines in entities like the EU, understanding the role of debt management is essential, and we look forward to seeing how the work of the experts at this conference will continue to develop. When put together, their findings show the complex but notable patterns we can trace in public debt management, and prevent future crises.



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