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A Tear for Argentina

CAMBRIDGE – Argentina’s latest default poses unsettling questions for policymakers. True, the country’s periodic debt crises are often the result of self-destructive macroeconomic policies. But, this time, the default has been triggered by a significant shift in the international sovereign-debt regime.

The shift favors hardline creditors in bond issuances governed by US law. With emerging-market growth slowing, and external debt rising, new legal interpretations that make debt future write-downs and reschedulings more difficult do not augur well for global financial stability.