Institute of Intergovernmental Relations


Whose debt is it anyway? Subnational Debt and the Limits of Market Discipline

Kyle Hanniman

Assistant Professor, Department of Political Studies; Associate Director,  Institute of Intergovernmental Relations, Queen's University

School of Policy Studies Speaker Series

Thursday March 23, 2017,  12:00 pm 
Robert Sutherland Hall, 138 Union Street, Room 202

** Light lunch starts at 11:30 AM             All are Welcome

The Eurozone debt crisis, Detroit’s bankruptcy and the rising debts of Canadian provinces remind us yet again of the challenges of managing government debt in decentralized currency unions. Some think the best way to discipline subnational borrowing is to signal to bond markets that the central government will not, under any circumstances, bail these governments out. But no-bailout pledges are rarely credible and, when they are, they may make subunits vulnerable to aggressive and fiscally damaging bouts of market discipline. This explains why many multi-level systems, including the Eurozone and Spain, are attempting to limit market discipline while constraining local borrowing through other, primarily political, means. Kyle Hanniman will discuss how these developments have played out in a number of multilevel systems, with a special emphasis on the Eurozone and the unusual Canadian case.