ABSTRACT
Economists know that protracted maneuvering does not make unpayable debts paid but increases the debt overhang. So-called phantom debts accumulate, which are economically non-existent as they cannot be recovered, but which make things difficult for everyone. The legalistic sovereignty argument is right as far as it goes. But the proposal of sovereign debt arbitration modeled on the basic principles of Unites States. The discussion on international insolvency subsided around 1990, starting again in the late 1990s, largely due to civil society, especially the Jubilee movement. This renewed interest justifies recapitulating the arguments in the light of the present debate. Insolvency is not an act of mercy but of economic reason, generally recognized as the best way to solve hopeless overindebtedness. After the Asian crash of 1997 insolvency procedures were to be improved. Insolvency only deals with claims based on solid and proper legal foundations. For odious debts, for example, no insolvency is needed; these are null and void.
