Centre for Finance and Development
10 December 2019

Finance & Development Expertise: The Ridiculous Drama in Rome Over Proposals to Reform the ESM Treaty

Professor Ugo Panizza, together with Theresa A. Arnold from McGuireWoods and Mitu Gulati from Duke University Law School, discuss why proposals to reform the European Stability Mechanism (ESM) are not as scary as some Italian politicians suggest.

So, why all the drama in Italian politics then? [...] As they say in Naples: ci sono o ci fanno.
Theresa A. Arnold, Ugo Panizza & Mitu Gulati

In their new blog post in the Oxford Business Law Blog, Professor Ugo Panizza from the Centre for Finance and Development, Theresa A. Arnold from McGuire Woods and Professor Mitu Gulati from Duke University Law School discuss the controversies currently taking place in Italian politics about proposed changes to the Treaty Establishing the European Stability Mechanism (ESM).

These controversies partly focus on Collective Action contract clauses (CACs) in sovereign bonds. The reform's opponents claim that these enhanced CACs, by making it easier for the sovereign to conduct a debt restructuring, will send a signal to the market that the sovereign is more likely to restructure. The three scholars analyse the newly enhanced CACs to dismiss this argument by pointing in particular to the ‘local law advantage’ that most Euro area countries, and especially Italy, currently possess. They also note that similar fears were already voiced when introducing CACs for the first time in 2013, and that these fears did not materialise.

Read the entire column here on the Oxford Business Law Blog. The column has been first published on the Oxford Business Law Blog on 10 December 2019.


In our series Finance & Development Expertise, we regularly present articles and other publications from the faculty of the Centre for Finance and Development (CFD). These include new publications as well as some of the best pieces from the archives.