Private creditors must be involved in debt restructuring negotiations since the very beginning, however, and their role in the process still needs to be clarified, the IIF said.
Eurozone finance ministers agreed last weekend that sovereign bonds issued as of 2013 would carry collective action clauses (CAC), an instrument that allows a country to restructure its debt with the agreement of only a certain percentage of creditors.
“Collective action clauses are very positive, given their history,” said IIF board member William Rhodes, who is also chairman of Citigroup.
“Mexico in 2002 was the first country to put them in. They did it on a voluntary basis when they had good market access, and they did it because they thought that was a prudent and correct thing to do,” Rhodes said.
Investors and ratings agencies have expressed concern about the new European rules for handling debt crises as of 2013. Many investors were rattled by the new mechanism as it puts an end to the era of automatic sovereign bailouts.