OECD’s Gurria on the ECB’s OMT

Great France24 interview with Angel Gurria, Secretary General of the Organisation for Economic Co-operation (OECD).  Have a look it’s worth your time and offers good insight into EU policymaker thinking.

Gurria is probably the world’s leading expert on sovereign debt issues.  Recall he was Mexico’s debt negotiator during 1980’s LDC debt crisis and negotiated the first Brady Plan commercial bank debt restructuring.

Here’s a little inside look how the world’s last debt crisis was resolved,

It will be twenty-two years ago this month when Mexico’s external debt negotiator, Angel Gurria, now Secretary-General of the OECD, fired the first pitch of the Brady Plan, named after the Treasury Secretary of new administration of President Bush #41. President Carlos Salinas of Mexico had taken office just four months earlier and stated his administration’s debt policy while campaigning: “If we don’t grow, we don’t pay.” He believed that only after addressing the debt overhang could Mexico return to stable economic growth..

In April 1989, Mr. Gurria brought his young team of Mexico’s “best and brightest” to New York, several of whom would go on to become presidents, cabinet ministers, and central bank presidents, to open negotiations with the country’s Bank Advisory Committee (BAC). This  committee represented the global banking community which held essentially all of Mexico’s $50 billion debt to foreign private creditors. Mr. Gurria opened negotiations by asking the BAC for a 55 percent haircut….

After listening to the proposal, one BAC member from a major Japanese bank turned to Mr. Gurria and said in his heavily accented English, “This menu is not edible!” It would take months of intense negotiations, which included a breakdown over the oil-linked value recovery rights and some arm twisting by President Bush and Fed Chairman, Alan Greenspan, for the two
parties to come to an agreement.

(click here if video is not observable)

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