The wonder-clause

- The Greek debt crisis prompted a reconstruction of EU sovereign debt markets.
- Collective Action Clauses (CACs) were promoted as a key tool to end bailouts.
- But CACs in Europe can make restructuring harder, and bailouts more likely.
- We use interviews and participant observation to revisit the rationale for CACs and their role in market construction.
- We conclude that officials used CACs to communicate burden-sharing policy; their efficacy as contract terms was secondary.

The Greek debt crisis prompted EU officials to embark on a radical reconstruction of the European sovereign debt markets. Prominently featured in this reconstruction was a set of contract provisions called Collective Action Clauses, or CACs. CACs are supposed to help governments and private creditors to renegotiate unsustainable debt contracts, and obviate the need for EU bailouts. But European sovereign debt contacts were already amenable to restructuring; adding CACs could make it harder. Why, then, promote CACs at all, and cast them in such a central role in the market reform initiative? Using interviews with participants in the initiative and those affected by it, as well as observations at policy and academic meetings, we attempt to shed light on the puzzle and draw implications for the role of contract techniques in market construction.