Emerging markets face bankruptcy threat
The Group of Seven nations have unanimously agreed to develop a Chapter 11-style economic plan to combat financial crisis in emerging markets.
At a meeting of the G7 at the US Treasury in Washington over the weekend, finance ministers and global lender the International Monetary Fund agreed to a four-point action plan including ‘sovereign debt restructuring’ in the event of a financial crisis and ‘collective action clauses in bond contracts’.
According to reports in the UK, the plan has the backing of chancellor Gordon Brown, who called it a ‘break-through’.
The plan should also see the end of massive IMF bailouts, with only limited official lending in times of crisis. But it also includes incentives for repayment of loans including continued access to markets and reasonable interest rates.
This is the first time the US, the rest of the G7 and the IMF have agreed to on a global plan for tackling the world’s economic woes.