Sub-sovereign bond buyback: a way forward for debt-laden regions in austerity

Eltrudis, Davide

;Bailey, Stephen J.;Monfardini, Patrizio

2019-01-01

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Abstract

Previous academic literature has criticised bond buyback as a ‘”boondoggle” benefiting a country’s creditors’—meaning that buybacks are a wasteful use of public money. This paper challenges the narrow financial–economic perspective behind that statement by adopting a broader socio-political framework that includes the potential benefits of buyback for citizens, not just financial market costs. In particular, buyback does not necessarily require a budget surplus via higher local taxes and/or increased austerity measures.