Providing order

The question of how to protect the public from mismanagement by governments and businesses continues to dominate the headlines. This week we look at comment on a German plan to manage the restructuring of countries that are unable to pay back their debts. We also look at a US government attempt to stop deep-water drilling in the Gulf of Mexico.

A need to plan

To make sovereign defaults more predictable, Germany is considering the creation of a sovereign resolution authority that would manage the orderly restructuring of a country unable to repay debts. This is far more realistic than believing defaults can be prevented, writes the Financial Times. However, Germany’s idea goes too far.

There are some things to like in this idea. The approach taken by the eurozone has been to extend public funds to tide over cash-strapped countries. This is fine so long as it extends no further than providing liquidity to ease a market panic. But it would not suffice were a country unable to pay back its debts. There is a need to plan for what comes next. ...

The snag with Germany’s idea is that it goes too far, suggesting harsh measures if a country proves unable to agree or stick to a restructuring plan. ... When sovereigns default, what is needed is a conference table not a torture chamber.

 A strong stand

The New York Times welcomes a move by the US government to suspend deep-water drilling in the Gulf of Mexico.

Interior Secretary Ken Salazar issued a second moratorium to replace an earlier ban that was tossed out in federal court. It is as strong as the first ban and, if anything, more tightly argued.

Whether the new ban can withstand legal challenges remains to be seen. The important point is that the administration has reaffirmed one of the basic lessons of this mess: that industry claims cannot be accepted at face value. ... Until the industry shows it can drill safely in deep waters, and respond swiftly and surely to an accident, it should not be allowed to go forward with that kind of operation.