The Ecuadorian Crisis and the International Financial Architecture
The default on its debts and the dollarisation of Ecuador are both symptoms of a serious political and economic crisis. These events are affecting a small country, and have limited international consequences. However, the insolvency of Ecuador raises fundamental questions for the artisans of the new international financial architecture, questions which differ from those surrounding the Mexican and Asian liquidity crises. Default by a State is not a new phenomenon, but the development of disintermediated finance requires original solutions. How can the activity of private creditors be coordinated? And, how can the burden of adjustment be shared out among private and public creditors? The answers to these questions still run up against the matter of the status of the creditors. The evolution of this status would make it possible both to maintain small countries' access to markets and to prevent "moral hazard" arising for countries which are "systemically important", and which benefit from lender-of-last-resort intervention.
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