July, 31 2014, 02:30pm EDT

Economists Call on Congress to Mitigate Fallout from Ruling on Argentine Debt
Decision "could cause unnecessary economic damage to the international financial system"
WASHINGTON
Over 100 economists, including Nobel laureate Robert Solow, Branko Milanovic and Dani Rodrik called on Congress today to take action to mitigate the harmful fallout from the recent ruling by Judge Griesa of the U.S. District Court for the Southern District of New York that requires Argentina to pay holdout creditors at the same time as the majority of creditors. The letter warns that "The District Court's decision - and especially its injunction that is currently blocking Argentina from making payments to 93 percent of its foreign bondholders -- could cause unnecessary economic damage to the international financial system, as well as to U.S. economic interests, Argentina, and fifteen years of U.S. bi-partisan debt relief policy."
"It's a widely shared opinion among economists that the court's attempt to force Argentina into a default that nobody - not the debtor nor more than 90 percent of creditors - wants, is wrong and damaging," said Mark Weisbrot, economist and Co-Director of the Center for Economic and Policy Research, who helped circulate the letter.
The letter warns that Griesa's decision could "torpedo an existing agreement with those bondholders who chose to negotiate." It also cautions that, since sovereign governments do not have the option of declaring bankruptcy, "the court's ruling would severely hamper the ability of creditors and debtors to conclude an orderly restructuring should a sovereign debt crisis occur. This could have a significant negative impact on the functioning of international financial markets, as the International Monetary Fund has repeatedly warned."
The court's decision "creates a moral hazard," the economists write, since investors will be allowed "to obtain full repayment, no matter how risky the initial investment."
The full letter appears below.
July 31, 2014
Dear Member of Congress,
We note with concern the recent developments in the court case of Argentina vs. NML Capital, etc. The District Court's decision - and especially its injunction that is currently blocking Argentina from making payments to 93 percent of its foreign bondholders -- could cause unnecessary economic damage to the international financial system, as well as to U.S. economic interests, Argentina, and fifteen years of U.S. bi-partisan debt relief policy. We urge you to act now and seek legislative solutions to mitigate the harmful impact of the court's ruling.
For various reasons, governments sometimes find themselves in situations where they cannot continue to service their sovereign debt. This was Argentina's situation at the end of 2001. After years of negotiations, Argentina reached a restructuring agreement with 93 percent of the defaulted bondholders, and has made all agreed-upon payments to them.
The court's decision that Argentina cannot continue to pay the holders of the restructured bonds unless it first pays the plaintiffs mean that any "holdout" creditor can torpedo an existing agreement with those bondholders who chose to negotiate. While individuals and corporations are granted the protection of bankruptcy law, no such mechanism exists for sovereign governments. As such, the court's ruling would severely hamper the ability of creditors and debtors to conclude an orderly restructuring should a sovereign debt crisis occur. This could have a significant negative impact on the functioning of international financial markets, as the International Monetary Fund has repeatedly warned.
Those who invested in Argentine bonds were compensated with high interest rates, to mitigate the risk of default. There are inherent risks when investing in sovereign bonds, but the court's ruling creates a moral hazard, by allowing investors to obtain full repayment, no matter how risky the initial investment.
The plaintiffs in the case purchased Argentine bonds on the secondary market after default, often for less than 20 cents on the dollar. While these actors could have accepted the restructuring and still made a very large profit, they instead have fought a decade-long legal battle, seeking exorbitant profits in excess of 1,000 percent and creating financial uncertainty along the way.
The recent developments will also directly impact the United States and its status as a financial center of the world economy. While much of the developing world's debt is issued under the jurisdiction of New York law and utilizing New York-based financial institutions, the court's ruling will make it more likely for sovereign governments to seek alternate locations to issue debt. Britain and Belgium, for example, have already passed legislation aimed at preventing this type of behavior from "holdout" creditors.
In addition, the court has put restrictions on New York banks, preventing them from distributing regularly scheduled interest payments to holders of the restructured bonds. Already, banks have faced lawsuits from investors, creating greater uncertainty for U.S.-based financial institutions.
Argentina has expressed a willingness to negotiate, and has recently reached agreements with the Paris Club as well as claims by international investors.
We hope that you will look for legislative solutions to prevent this court decision, or similar rulings, from causing unnecessary harm.
Sincerely,
Robert Solow, Nobel laureate in Economics, 1987, MIT Professor of Economics, emeritus Dani Rodrik, Albert O. Hirschman Professor in the school of Social Sciences at the Institute for Advanced Study in Princeton, New Jersey Branko Milanovic, Luxembourg Income Study Center, the Graduate Center CUNY, former Lead Economist in the World Bank's research department |
Andrew Allimadi, United Nations, Department of Economics and Social Affairs |
Gar Alperovitz, University of Maryland |
Eileen Applebaum, Center for Economic and Policy Research |
Mariano Arana, Universidad Nacional de General Sarmiento |
Leonardo Asta, Universita degli Studi di Padova |
Venkatesh Athreya, Bharathidasan University |
Dean Baker, Center for Economic and Policy Research |
William Barclay, Chicago Political Economy Group |
Jairo Alonso Bautista, Universidad Santo Tomas |
Gunseli Berik, University of Utah |
Alexandra Bernasek, Colorado State University |
Cyrus Bina, University of Minnesota (Morris Campus) |
Josh Bivens, Economic Policy Institute |
Peter Bohmer, The Evergreen State College |
Korkut Boratav, Turkish Social Science Association |
Elissa Braunstein, Colorado State University |
Jorge BUZAGLO, University of Goteburg |
Jim Campen, Americans for Fairness in Lending |
Carlos A. Carrasco, University of the Basque Country |
Sergio Cesaratto, University of Siena |
Kyung-Sup Chang, Seoul National University |
Kimberly Christensen, SUNY/Purchase College |
Michael Cohen, New School for Social Research |
Brendan Cushing - Daniels, Gettysburg College |
Omar Dahi, Hampshire College |
Carlo D'Ippoliti, University of Rome |
Peter Dorman, Evergreen State College |
Amitava Dutt, University of Notre Dame |
Dirk Ehnts, University of Oldenburg |
Gerald Epstein, University of Massachusetts, Amherst |
Susan Ettner, University of California, Los Angeles |
Jeffrey Faux, Economic Policy Institute |
Massoud Fazeli, Hofstra University |
Andrew Fischer, International Institute of Social Studies |
Jeffrey Frankel, Harvard Kennedy School |
Roberto Frenkel, CEDES Argentina |
Kevin Gallagher, Boston University |
Chris Georges, Hamilton College |
Reza Ghorashi, Richard Stockton College |
Jayati Ghosh, JNU New Delhi and Ideas |
David Gold, New School University |
Neva Goodwin, Tufts University |
Maria Florencia Granato, Corporacion Andina de Fomento |
Martin Hart-Landsberg, Lewis and Clark |
Conrad Herold, Hofstra University |
P. Sai-wing Ho, University of Denver |
Andreas Hoth |
Gustavo Indart, University of Toronto |
Joseph Joyce, Wellesley College |
J K Kapler, University of Massachusetts Boston |
Martin Khor, South Centre |
Gabriele Koehler |
Andrew Kohen, James Madison University |
Nikoi Kote-Nikoi |
Pramila Krishnan, University of Cambridge |
David Legge, La Trobe University |
Henry Levin, Columbia University |
Mah hui Lim, South Centre |
Rodrigo Lopez-Pablos |
Robert Lynch, Washington College |
Arthur MacEwan, University of Massachusetts Boston |
Jeff Madrick, The Century Foundation |
Cheryl Maranto, Marquette University |
Ann Markusen, University of Minnesota |
Julie Mattahei, Wellesley College |
Kathleen McAfee, San Fransisco State University |
Elaine McCrate, University of Vermont |
Hannah McKinney, Kalamazoo College |
Thomas Michl, Colgate University |
William Milberg, New School for Social Research |
Larry Mishel, Economic Policy Institute |
Mritiunjoy Mohanty, Indian Institute of Management |
Nicolas Moncaut |
Tracy Mott, University of Denver |
Michael Murray, Bates College |
Luiz M Niemeyer, Pontifical Catholic University of Sao Paulo |
Machiko Nissanke, SOAS University of London |
Manfred Nitsch, Free University of Berlin |
Jose Antonio Ocampo, Columbia University |
Carlos Oya, University of London |
Marco Palacios, El Colegio de Mexico |
Antonella Palumbo, Roma Tre University |
Dimitri B. Papadimitriou, Levy Economics Institute of Bard College |
Mark Paul, University of Massachusetts Amherst |
Lorenzo Pellegrini, International Institute of Social Studies |
Lucia Pittaluga Fonseca, Universidad de la Republica (Uruguay) |
Renee Prendergast, Queen's University- Belfast |
Mark Price, Keystone Research Center |
Alicia Puyana, Facultad Latinoamercana de Ciencias Sociales |
Charles Revier, Colorado State University |
Joseph Ricciardi, Babson College |
Malcolm Robinson, Thomas More College |
Leopoldo Rodriguez, Portland State University |
John Roemer, Yale University |
David Rosnick, Center for Economic and Policy Research |
Antonio Savoia, University of Manchester |
John Schmitt, Center for Economic and Policy Research |
Stepphanie Seguino, University of Vermont |
Anwar Shaikh, New School for Social Research |
Kannan Srinivasan |
James Stanfield |
Eduardo Strachman |
William K. Tabb, Queens College |
Ezequiel Tacsir, United Nations University |
Philipp Temme, Free University of Berlin |
Frank Thompson, University of Michigan |
Chris Tilly, University of California, Los Angeles |
Mario Tonveronachi, University of Siena |
Lawal Tosin |
Chiwuike Uba, African Heritage Institution |
Bunu Goso Umara |
Leanne Ussher, Queens College, CUNY |
Rolph van der Hoeven, International Institute of Social Studies |
Irene van Staveren, International Institute of Social Studies |
Matias Vernengo, Bucknell University |
David Weiman, Barnard College |
Mark Weisbrot, Center for Economic and Policy Research |
Thomas Weisskopf, University of Michigan |
John Willoughby, American University |
Yavuz Yasar, University of Denver |
A. Erinc Yeldan, Yasar University |
Erhan Yildirim, Cukurova University |
Ben Zipperer, University of Massachusetts, Amherst |
Keep reading...Show less
The Center for Economic and Policy Research (CEPR) was established in 1999 to promote democratic debate on the most important economic and social issues that affect people's lives. In order for citizens to effectively exercise their voices in a democracy, they should be informed about the problems and choices that they face. CEPR is committed to presenting issues in an accurate and understandable manner, so that the public is better prepared to choose among the various policy options.
(202) 293-5380LATEST NEWS
As Historic Heatwave Grips Europe, Coalition Says 'No to a Climate Law for Polluters'
"Will the European Commission propose a climate law that ends fossil fuel use and reflects the E.U.'s fair share of climate responsibility? Or will it choose political convenience?"
Jun 30, 2025
As yet another dangerous heatwave pushes temperatures well into the triple digits across much of Europe, climate defenders on Monday renewed calls for stronger action to combat the planetary emergency—including by ensuring that the impending European Climate Law ends fossil fuel use and eschews false solutions including international carbon offsetting.
Croatia, France, Italy, Portugal, and Spain are among the countries where near- or record-high temperatures have been recorded. Portugal and Spain both recorded their hottest-ever June days over the weekend. El Granado in southwestern Spain saw the mercury soar to nearly 115°C (46°C) on Saturday. The heatwave is expected to continue into the middle of the week, with authorities warning of elevated wildfire risk and potential severe health impacts.
"Extreme heat is no longer a rare event—it has become the new normal," United Nations Secretary-General António Guterres said Sunday on social media. "I'm experiencing it firsthand in Spain during the Financing for Development Conference. The planet is getting hotter and more dangerous—no country is immune. We need more ambitious #ClimateAction now."
On Monday, Real Zero Europe—"a campaign calling on the European Union to deliver real emissions reductions and real solutions to the climate crisis, instead of corporate greenwashed 'net zero' targets"—published a call for an E.U. Climate Law that does not contain provisions for international carbon offsetting, in which countries or corporations compensate for their greenhouse gas emissions by funding projects that reduce emissions in other nations.
🔴 OUT NOW📢 69 NGOs call on the EU to deliver a Climate Law that rejects international carbon offsetting & Carbon Dioxide Removals (#CDR), commits to a full fossil fuel phase-out, and reflects Europe’s fair share of climate responsibility!Read the statement👇www.realzeroeurope.org/resources/st...
[image or embed]
— Real Zero Europe (@realzeroeurope.bsky.social) June 30, 2025 at 2:40 AM
A draft proposal of the legislation published Monday by Politico revealed that the European Commission will allow E.U. member states to outsource climate efforts to Global South nations staring in 2036, despite opposition from the 27-nation bloc's independent scientific advisory board. The outsourcing will enable the E.U. to fund emissions-reducing projects in developing nations and apply those reductions to Europe's own 2040 target—which is a 90% net decrease in greenhouse gas emissions from 1990 levels.
The proposal also embraces carbon dioxide removal (CDR) technologies like carbon capture and storage, whose scalability is unproven. Climate groups call them false solutions that prolong the fossil fuel era.
"E.U. climate policy stands at a crossroads: Will the European Commission propose a climate law that ends fossil fuel use and reflects the E.U.'s fair share of climate responsibility?" the Real Zero Europe letter says. "Or will it choose political convenience—abandoning that goal under pressure from corporate and populist interests, and turning to risky, unjust carbon offsetting and other false solutions?"
"Taking responsibility for the E.U.'s past and present role in causing the climate crisis means doubling down on a just and full fossil fuel phaseout not hiding behind false solutions as currently proposed," the letter continues. "The law as planned will send a dangerous signal far beyond E.U. borders. The climate and biodiversity crises are already harming people, especially vulnerable communities and populations largely in the Global South, who have least contributed to the climate crisis."
The 69 groups stress that international carbon offsetting "is a smokescreen for giving license to fossil fuel use beyond 2050" that diverts critical resources and public funds from real climate solutions and climate finance."
"Given the scale of climate catastrophe, for the E.U. to allow international offsets and technological CDR gives a lifeline to polluting industries such as the fossil fuel, agribusiness, plastics, and petrochemical industries," the letter states.
"We say no to an E.U. Climate Law that puts polluting industries over people and climate by embracing the use of international offsets and CDR approaches," the letter's signers said. "We call on the Commission to deliver an E.U. Climate Law and its Nationally Determined Contribution (NDC) to the U.N. climate negotiations that clearly reflects the bloc's responsibility for the climate crisis. That means a full fossil fuel phaseout and a just transition."
This heatwave is brutal. Temperatures above 40°C in June across France, Spain, Italy...We still hear from right-wing politicians that “it’s just summer.” It’s not. This is the climate crisis courtesy of the fossil fuels industry. It’s not normal.
[image or embed]
— European Greens (@europeangreens.eu) June 30, 2025 at 7:01 AM
U.N. High Commissioner for Human Rights Volker Türk also addressed the European heatwave on Monday, saying that "the climate crisis is a human rights crisis."
"Rising temperatures, rising seas, floods, droughts, and wildfires threaten our rights to life, to health, to a clean, healthy and sustainable environment, and much more," he continued. "The heatwave we are currently experiencing here shows us the importance of adaptation measures, without which human rights would be severely impacted."
"It is equally clear that our current production and consumption patterns are unsustainable, and that renewables are the energy source of the future," Türk asserted. "Production capacity for renewables increased five-fold between 2011 and 2023. What we need now is a roadmap that shows us how to rethink our societies, economies and politics in ways that are equitable and sustainable. That is, a just transition."
"This shift requires an end to the production and use of fossil fuels and other environmentally destructive activities across all sectors—from energy to farming to finance to construction and beyond," he added. "This will be one of the greatest transformations our world has ever seen."
Keep ReadingShow Less
'Hell No,' Say Critics as Trump's Megabill Poised to Drastically Expand ICE's Dragnet
"This is the level of funding where all the possibilities for American politics that have been described as hyperbolic over the past decades—the comparisons to Nazi Germany and other nightmares of the 20th century—become logistically possible and politically likely," wrote one observer.
Jun 30, 2025
Critics are sounding the alarm as congressional Republicans edge closer to passing a sweeping tax and spending bill desired by U.S. President Donald Trump that would inject tens of billions of dollars of funding into U.S. Immigration and Customs Enforcement, the agency at the forefront of the president's immigration crackdown.
"Republicans' Big, Bad Betrayal Bill shovels BILLIONS OF DOLLARS more into ICE's budget. Yes, the same ICE that has arrested U.S. citizens, carried out illegal deportations, and denied members of Congress access to detention facilities. HELL NO," wrote Rep. Pramila Jayapal (D-Wash.) on X on Sunday.
On Monday, the Senate kicked off a vote-a-rama process where senators can demand an unlimited number of votes on amendments to the reconciliation package.
While negotiations on the legislation are still ongoing, the version of the reconciliation bill that was narrowly advanced in the Senate on Saturday includes $29.85 billion for ICE to "remain available through September 30, 2029" for personnel recruitment, technology for "enforcement and removal operations," and other priorities. It also includes $45 billion "for single adult alien detention capacity and family residential center capacity," also available through the same period.
The bill text also includes $46.5 billion for U.S. Customs and Border Protection to spend on border infrastructure, to remain available through September 30, 2029.
Journalist Nicolae Viorel Butler, who reports on immigration for the outlet Migrant Insider, reported on Sunday that all told the measure proposes in excess of $175 billion in "direct immigration-related funding for fiscal year 2025."
This, Butler wrote, reflects "a historic expansion of immigration enforcement operations under a Republican-controlled Congress and the Trump administration."
This money would be a big addition on top of what these agencies already receive. For example, a National Immigration Forum explainer focused on the House version of the reconciliation package noted that $45 billion for ICE detention capacity constitutes an 800% increase in detention funding compared to fiscal year 2024.
"This is the level of funding where all the possibilities for American politics that have been described as hyperbolic over the past decades—the comparisons to Nazi Germany and other nightmares of the 20th century—become logistically possible and politically likely," wrote the philosopher Olúfẹ́mi O. Táíwò on Bluesky, commenting on the infusion of funding.
In every state, immigration arrests carried out by ICE have sharply increased. Also the number of those arrested and detained by ICE who have no criminal record is up more than 1,400% compared to a year ago, according to The Washington Post.
Increased funding for ICE and immigration enforcement is not the only part of the bill drawing scrutiny.
In May, nonpartisan budget scorekeepers said that the U.S. House of Representatives-passed version of the legislation would, if passed, cut household resources for the bottom 10% of Americans while delivering gains to the wealthiest in the form of tax breaks. Bobby Kogan, senior director of federal budget policy at the Center for American Progress, called the House version of the legislation the "the largest transfer of wealth from the poor to the rich in a single law in U.S. history."
"If the Republican budget passes, a lot of Americans will indeed suffer. But so too will millions of noncitizens who came to the U.S. seeking better lives for themselves and their families," wrotePost columnist Philip Bump of the increase in funding for ICE.
Keep ReadingShow Less
UN Expert Calls for 'Defossilization' of World Economy, Criminal Penalties for Big Oil Climate Disinformation
Fossil fuel companies have for decades "instilled doubt about the need to act on, and the viability of, renewables," said U.N. climate expert Elisa Morgera.
Jun 30, 2025
As health officials across Europe issued warnings Monday about extreme heat that could stretch into the middle of the week in several countries—the kind of dangerous conditions that meteorologists have consistently said are likely to grow more frequent due to human-caused climate change—a top United Nations climate expert told the international body in Geneva that the "defossilization" of all the world's economies is needed.
Elisa Morgera, the U.N. special rapporteur on climate change, presented her recent report on "the imperative of defossilizing our economies," with a focus on the wealthy countries that are projected to increase their extraction and use of fossil fuels despite the fact that "there is no scientific doubt that fossil fuels... are the main cause of climate change."
"Despite overwhelming evidence of the interlinked, intergenerational, severe, and widespread human rights impacts of the fossil fuel life cycle," said Morgera, "these countries have and are still accruing enormous profits from fossil fuels, and are still not taking decisive action."
World leaders must recognize the phase-out of fossil fuels "as the single most impactful health contribution" they could make, she argued.
Morgera named the U.S., U.K., Australia, and Canada as wealthy nations where governments are still handing out billions of dollars in subsidies to fossil fuel companies each year—direct payments, tax breaks, and other financial support whose elimination could reduce worldwide fossil fuel emissions by 10% by 2030, according to the report.
"These countries are responsible for not having prevented the widespread human rights harm arising from climate change and other planetary crises we are facing—biodiversity loss, plastic pollution, and economic inequalities—caused by fossil fuels extraction, use, and waste," said Morgera.
She also pointed to the need to "defossilize knowledge" by holding accountable the companies that have spent decades denying their own scientists' knowledge that continuing to extract oil, coal, and gas would heat the planet and cause catastrophic sea-level rise, hurricanes, flooding, and dangerous extreme heat, among other weather disasters.
Defossilizing information systems, said Morgera, would mean protecting "human rights in the formation of public opinion and democratic debate from undue commercial influence" and correcting decades of "information distortions" that have arisen from the public's ongoing exposure to climate disinformation at the hands of fossil fuel giants, the corporate media, and climate-denying politicians.
Morgera said states should prohibit all fossil fuel industry lobbying, which companies like ExxonMobil and Chevron spent more than $153 million last year in the U.S. alone—with spending increasing each year since 2020, according to OpenSecrets.
"More recent research has documented climate obstruction—intentional delaying efforts, including through media ownership and influence, waged against efforts for effective climate action aligned with the current scientific consensus," wrote Morgera. "Fossil fuel companies' lobbyists have increased their influence in public policy spaces internationally... and at the national level, to limit regulations and enforcement. They have instilled doubt about the need to act on, and the viability of, renewables, and have promoted speculative or ineffective solutions that present additional lock-in risks and higher costs."
While a transition to a renewable energy-based economy has been portrayed by the fossil fuel industry and its supporters in government as "radical," such a transition "is now cheaper and safer for our economics and a healthier option for our societies," Morgera toldThe Guardian on Monday.
"The transition can also lead to significant savings of taxpayer money that is currently going into responding to climate change impacts, saving health costs, and also recouping lost tax revenue from fossil fuel companies," she said. "This could be the single most impactful health contribution we could ever make. The transition seems radical and unrealistic because fossil fuel companies have been so good at making it seem so."
In addition to lobbying bans, said Morgera, governments around the world must ban fossil fuel advertising and criminalize "misinformation and misrepresentation (greenwashing) by the fossil fuel industry" as well as media and advertising firms that have amplified the industry's disinformation and misinformation.
Several countries have taken steps toward meeting Morgera's far-reaching demands, with The Hague in the Netherlands introducing a municipal ordinance in 2023 banning fossil fuel ads, the Australian Green Party backing such a ban, and Western Australia implementing one.
The fossil fuel industry's "playbook of climate obstruction"—from lobbying at national policymaking summits like the annual U.N. Climate Change Conference to downplaying human rights impacts like destructive storms and emphasizing the role of fossil fuels in "economic growth"—has "undermined the protection of all human rights that are negatively impacted by climate change for over six decades," said Morgera.
Morgera pointed to three ways in which states' obligations under international humanitarian laws underpin the need for a fossil fuel phaseout by 2030:
- The survival of states that contributed minimally to climate change is impaired by loss of territory to sea-level rise and/or protracted unsafe climatic conditions;
- People are substantially deprived of their means of subsistence because of the severe deterioration of entire ecosystems due to climate change due to flooding, drought, and extreme heat; and
- The cultural survival of the populations of small island developing states, Indigenous peoples, people of African descent, peasants and small-scale fishers is impaired by loss of territories, protracted unsafe climatic conditions and/or severe ecosystem degradation.
Morgera's report was presented as more than a third of Tuvaluans applied for a visa to move to Australia under a new climate deal between the two countries, as the Pacific island is one of the most vulnerable places on Earth to rising sea levels and severe storms.
Morgera said that fossil fuel industry's impact on the human rights of people across the Global South—who have contributed little to the worsening of the climate emergency—"compels urgent defossilization of our whole economies, as part of a just, effective, and transformative transition."Keep ReadingShow Less
Most Popular