The settlement of the external debt of insolvent sovereign borrowers has become one of the most important issues in relations between the north and south since the outbreak of the global debt crisis in the early 1980s. For the past eight years representatives of governments and international organizations, bankers, and scientists have suggested several proposals and plans to solve the present debt crisis. The most prominent schemes in this respect are the Baker Plan of 1985, which suggested massive new credits for the most highly indebted developing countries, and the recently adopted Brady Plan, which proposes partial debt discounts and reductions in interest rates. Both of these debt settlement proposals were initiated by the United States and are supported by the other principal creditor countries. However, despite the ten years of crisis management, world leaders have not yet agreed upon a longterm solution to the current debt problems. In the history of the capitalist world economy, the current problems of coping with a global debt crisis do not represent a unique event. Rather, recent empirical studies demonstrate that sovereign borrowers have experienced many instances of debt-servicing difficulties during the past 150 years (Eichengreen and Portes 1986; White 1986; Eichengreen and Lindert 1989; Marichal 1989; Suter 1989).
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