I read the following excerpt on Peterson Institute of International Economics and I was wondering if other entities such as the EU or China had the same power as the United States in preventing other countries from issuing new debt. I was also wondering if such power is an extra legal power, or a power some countries have under international laws.
After a decade of feckless efforts to get Argentina to accede to holdouts’ demands for preferential payout, a US federal judge issued an injunction effectively blocking the government from paying its restructured debt or issuing new debt to replenish its foreign exchange reserves—not even in London or Buenos Aires, not even under Argentina’s own law. The court did so by targeting market intermediaries—trustees, payment systems, clearinghouses around the world—which, unlike the government of a sovereign country, could ill afford to jeopardize their business in New York. This was a weapon that worked entirely by inflicting collateral damage, even as the court was “bemoaning” its effects on “entirely innocent third parties.”