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The Mutualization of Sovereign Debt: Comparing the American Past and the European Present

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  • Armin Steinbach

Abstract

This study identifies commonalities between two historical incidents of debt assumption – in the United States in 1791 and in present‐day Europe. By comparing the interests and behaviour of key players in these two incidents, we find three major parallels: first, in their strategic interactions, parties both for and against debt mutualization raise arguments based on notions of fairness and morality; second, in both historical episodes we find harsh rhetoric levelled against private creditors, who are derided as greedy speculators; third, bargaining is an essential element of the debt assumption process. Bargaining is directed toward limiting or expanding the scope of debt assumption. Further, bargaining typically leads to some form of conditionality imposed in order to increase the chances of the debts being repaid or to ensure benefits accrue to the parties assuming the debt.

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  • Armin Steinbach, 2015. "The Mutualization of Sovereign Debt: Comparing the American Past and the European Present," Journal of Common Market Studies, Wiley Blackwell, vol. 53(5), pages 1110-1125, September.
    • Handle: RePEc:bla:jcmkts:v:53:y:2015:i:5:p:1110-1125
    DOI: 10.1111/jcms.12246
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    References listed on IDEAS

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    1. C. Randall HENNING & Martin KESSLER, 2012. "Fiscal Federalism: US History for Architects of Europe’s Fiscal Union," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 6, pages 1-31.
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    1. I. Balyuk & И. Балюк А., 2018. "Проблема внешнего долга и мировая финансовая архитектура // External Debt Problem and Global Financial Architecture," Review of Business and Economics Studies // Review of Business and Economics Studies, Финансовый Университет // Financial University, vol. 6(4), pages 18-29.
    2. Esteves Rui Pedro & Tunçer Ali Coşkun, 2016. "Eurobonds Past and Present: A Comparative Review on Debt Mutualization in Europe," Review of Law & Economics, De Gruyter, vol. 12(3), pages 659-688, November.
    3. van Aarle, Bas & Engwerda, Jacob & Weeren, Arie, 2018. "Effects of debt mutualization in a monetary union with endogenous risk premia: Can Eurobonds contribute to debt stabilization?," Structural Change and Economic Dynamics, Elsevier, vol. 44(C), pages 100-114.
    4. Jacob Engwerda & Bas van Aarle & Arie Weeren & Bas Van Aarle, 2015. "Debt Stabilization and Debt Mutualization in a Monetary Union with Endogenous Risk Premia," CESifo Working Paper Series 5564, CESifo.
    5. David Chavanne, 2017. "Shaking Off Burdens – Debt Relief and Moral Intuitions," Kyklos, Wiley Blackwell, vol. 70(3), pages 381-401, August.
    6. Tomasz P. Woźniakowski, 2023. "No Borrowing Without Taxing? Fiscal Solidarity of Next Generation EU in Light of the American Experience," Politics and Governance, Cogitatio Press, vol. 11(4), pages 73-81.

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