We had two events at the Florence School of Banking and Finance over the past two weeks on financial and sovereign debt stability. Joint with Georgetown University, Graduate Institute of Geneva and the Sovereign Debt Fund,
we held the 5th edition of DebtCon last week in Florence, a fascinating interdisciplinary event with economists, lawyers, historians and political scientists, academics, practitioners and policymakers.
As the world has been emerging from the pandemic, corporate and sovereign overindebtedness as consequence of the pandemic, lockdowns and government support measures has been of increasing concerns. With monetary policy in the US tightening (and at least a
normalisation on the horizon in the euro area) and thus the global financial cycle tightening even more rapidly after the Russian invasion of the Ukraine, the threat of sovereign distress becomes more acute and is already happening in some countries, such
as Sri Lanka. However, we were reminded that the current (corporate and sovereign) debt wave actually started in 2010, with global sovereign debt/GDP now higher than global corporate debt/GDP. If the fear of a global recession materialises, there
might be further sovereign distress such as in some countries of the former Soviet Union and Central America and Caribbean.