Facing immediate credit rationing and large output contractions, they could be stabilized only by exceptional official financing from abroad, and, in some extreme cases, by defaulting on past commitments (including to bondholders and, most recently, bank depositors).

In recent years, shrewd creditor lawyers have argued that investment treaties give bondholders the same rights as foreign direct investors, and have smuggled sovereign-debt cases into international arbitration proceedings wherever they have found investment treaties with broad, open-ended definitions.

Thousands of Italian bondholders refused Argentina’s debt-restructuring deal, successfully arguing that the Italy-Argentina investment treaty gave them the right to pursue compensation through investor-state arbitration.

The Eurogroup, for example, has declared that all eurozone sovereign bonds issued after January 1, 2013, should include CACs, which render a government’s debt-restructuring proposal legally binding on all bondholders if a majority of bondholders accept the deal.

Yet before the cameras turn away from Ukraine, officials and leaders can ensure that a future administration there is not left facing bondholders one by one in international arbitration proceedings.

Increased resolution authority will help, but only a little: in the last crisis, US government “blinked,” failed to use the powers that it had, and needlessly bailed out shareholders and bondholders – all because it feared that doing otherwise would lead to economic trauma.

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