Karl posted a link to yesterday’s speech by Lorenzo Bini-Smaghi. I would focus on his theme that debt restructuring is a good idea but that it should be used as a last resort, rather than pre-emptively. Some relevant quotes:
The point I would like to make is that having the private sector actively involved in preventing and resolving sovereign crises is a good idea.
This is why such restructuring should only be the last resort, i.e. when it is clear that the debtor country cannot repay its debts.
Where is the problem? The problem emerges when debt restructuring is carried out not as the last resort but as a preventive tool, even becoming a precondition for receiving (or providing) financial assistance, a point mentioned in some official circles since mid-October 2010. Debt restructuring would be a way to tackle not only dramatic cases of insolvency but also any difficulties countries face in accessing the financial markets.
Accordingly, the speech usefully boils down the argument to its essence – at what point should policymakers insist on private-sector burden sharing vis-a-vis sovereign debt? LBS provides reasons to argue that it is too early to close off other options; others will judge that it is better to eliminate the debt overhang now.