6  BIS central bankers’ speeches  This automatic maturity extension would allow the sovereign in question to tackle its fiscal challenges while preventing investors from bolting. Liability and control would be brought better into balance. That would reduce the amount of official financial support, and buy time to figure out whether the problem is one of temporary illiquidity or insolvency.
But ultimately, all these questions boil down to the quip by American economist Allan Meltzer: “Capitalism without failure is like religion without sin. It doesn’t work.” For the above proposals to work, we need to make sure that the restructuring of both banks and sovereign debt is possible without bringing down the financial system as a whole.