Eurozone sovereign debt restructuring: keeping the vultures at bay.

The eurozone debt crisis has stimulated lively debate on mechanisms for sovereign debt restructuring. The immediate threat of exit and the break-up of the currency union may have abated; but the problem of dealing with significant debt overhang remains. After considering two broad approaches—institutional versus contractual—we look at a hybrid solution that combines the best of both. In addition to debt contracts with collective action clauses, this includes a key amendment to the Treaty establishing the European Stability Mechanism, together with innovative state-contingent contracts and a special purpose vehicle to market them. [ABSTRACT FROM AUTHOR]