Abstract

Amongst the measures taken inside the European Union to tackle the sovereign debt crisis, the focus of the legal scholarship has been mainly on the financial stability mechanisms and the European Central Bank’s action. These initiatives constitute the liquidity assistance part of the response. Arguably, less attention has been devoted to the initiatives intended to face issues of debt sustainability. As regards the course of action to adopt in case a country cannot repay its debt, the European Union opted for collective action clauses (CACs). This paper takes a critical look at the Eurozone CACs. It aims to answer the following research question: Are the adopted CACs an efficient means to achieve their purported objective (i.e. facilitate renegotiations of sovereign bonds between creditors and the sovereign debtor)? To do so, the paper investigates the CACs’ content and their historical bases. It then compares the final version with the initial draft and points to several interesting findings. The paper argues that it is likely that practical results from the use of CACs will be significantly below political leaders’ expectations.