Public debt sustainability and crises in emerging market countries: a presentation of the concepts and diagnostic tools.

The growth of public debt in emerging market countries during the 1990s and recent financial crises have once again highlighted the risks associated with fragile public finances in these countries. The debt restructurings of the 1980s resulted from excessive debt vis-à-vis international banks. The 1990s saw a strong surge in financing on bond markets, which also brought risks with it and contributed to changing the nature and pattern of sovereign debt crises. The 1990s were marked by crises in investor confidence leading to sudden reversals in capital flows and sharp exchange rate movements, in turn sparking contagion phenomena between different economic sectors and countries. In this context, the government has a crucial role to play in limiting the impact of the drop in revenue. When public finances are fragile, doubts about the government’s ability to meet the financial cost of its intervention can contribute to prolonging the crisis or to triggering unsustainable debt dynamics. Emerging market countries that are heavily indebted in foreign currencies and subject to intermittent access to financial markets are particularly vulnerable to changes in international investor sentiment. Against this backdrop, the formulation of diagnoses making it possible to identify the risks weighing on public finances in emerging market countries is an important issue for the international community. In the light of recent experience, over the past few years the IMF has developed an analytical framework that should contribute to better account being taken of potential vulnerabilities in this area. This article begins by recalling that the rise in public debt in emerging market countries has gone hand in hand with the growth in debt financing and that “capital account crises” have had a significant impact on public finances. It reviews the traditional analysis of debt sustainability and the factors that may explain the instability of debt dynamics in emerging market countries. Lastly, it presents the methods for debt sustainability analysis used by the IMF and the difficulties involved in making diagnoses.

Towards a voluntary Code of good conduct for Sovereign Debt Restructuring.

The experience of sovereign debt crises in the 1980s and the 1990s has shown that the resolution of crises involved co-operative efforts in which all parties concerned actively participated. With the globalisation of economies, the sophistication of financial techniques, the generalisation of marketable debt instruments and the large diversification of various classes of creditors, an appropriate reshuffling of the overall debt crisis framework appears increasingly necessary. In addition to the strengthening of the International Monetary Fund (IMF) crisis management procedures (e.g. enhancing limits to IMF financing), the international debate has first focused on two approaches for facilitating debt restructuring: the so-called “contractual approach” – based on the generalised inclusion of Collective Action Clauses (CAC) in bond contracts – and the “statutory approach”, i.e. the proposal of a legal international sovereign debt restructuring mechanism (SDRM). While important progress has been achieved in promoting CACs, including their incorporation in recent bond issues of major emerging market countries, the 2003 IMF Spring Meetings concluded that it was not feasible at this stage to move forward to establish the SDRM, while recognising that work should continue on issues that are of general relevance to the orderly resolution of crises. Against this background, the international community and the private sector have expressed interest in developing a non-statutory framework for addressing debt-servicing problems, based on a proposal of a voluntary “Code of Good Conduct” put forward by Governor Trichet. This Code would lay down general principles to be complied with by all stakeholders, provide creditors and debtors with a « roadmap » of the debt renegotiation process and a “tool kit” consisting of a range of instruments (primarily CAC), and procedures regarded by the international community as best practices. The G7 officials are expected to prepare a report on the Code, in consultation with issuers and the private sector by autumn 2003.

Toll-8/Tollo Negatively Regulates Antimicrobial Response in the Drosophila Respiratory Epithelium

Barrier epithelia that are persistently exposed to microbes have evolved potent immune tools to eliminate such pathogens. If mechanisms that control Drosophila systemic responses are well-characterized, the epithelial immune responses remain poorly understood. Here, we performed a genetic dissection of the cascades activated during the immune response of the Drosophila airway epithelium i.e. trachea. We present evidence that bacteria induced-antimicrobial peptide (AMP) production in the trachea is controlled by two signalling cascades. AMP gene transcription is activated by the inducible IMD pathway that acts non-cell autonomously in trachea. This IMD-dependent AMP activation is antagonized by a constitutively active signalling module involving the receptor Toll-8/Tollo, the ligand Spätzle2/DNT1 and Ect-4, the Drosophila ortholog of the human Sterile alpha and HEAT/ARMadillo motif (SARM). Our data show that, in addition to Toll-1 whose function is essential during the systemic immune response, Drosophila relies on another Toll family member to control the immune response in the respiratory epithelium

Caenorhabditis elegans Semi-Automated Liquid Screen Reveals a Specialized Role for the Chemotaxis Gene cheB2 in Pseudomonas aeruginosa Virulence

Pseudomonas aeruginosa is an opportunistic human pathogen that causes infections in a variety of animal and plant hosts. Caenorhabditis elegans is a simple model with which one can identify bacterial virulence genes. Previous studies with C. elegans have shown that depending on the growth medium, P. aeruginosa provokes different pathologies: slow or fast killing, lethal paralysis and red death. In this study, we developed a high-throughput semi-automated liquid-based assay such that an entire genome can readily be scanned for virulence genes in a short time period. We screened a 2,200-member STM mutant library generated in a cystic fibrosis airway P. aeruginosa isolate, TBCF10839. Twelve mutants were isolated each showing at least 70% attenuation in C. elegans killing. The selected mutants had insertions in regulatory genes, such as a histidine kinase sensor of two-component systems and a member of the AraC family, or in genes involved in adherence or chemotaxis. One mutant had an insertion in a cheB gene homologue, encoding a methylesterase involved in chemotaxis (CheB2). The cheB2 mutant was tested in a murine lung infection model and found to have a highly attenuated virulence. The cheB2 gene is part of the chemotactic gene cluster II, which was shown to be required for an optimal mobility in vitro. In P. aeruginosa, the main player in chemotaxis and mobility is the chemotactic gene cluster I, including cheB1. We show that, in contrast to the cheB2 mutant, a cheB1 mutant is not attenuated for virulence in C. elegans whereas in vitro motility and chemotaxis are severely impaired. We conclude that the virulence defect of the cheB2 mutant is not linked with a global motility defect but that instead the cheB2 gene is involved in a specific chemotactic response, which takes place during infection and is required for P. aeruginosa pathogenicity

Caenorhabditis elegans Genomic Response to Soil Bacteria Predicts Environment-Specific Genetic Effects on Life History Traits

With the post-genomic era came a dramatic increase in high-throughput technologies, of which transcriptional profiling by microarrays was one of the most popular. One application of this technology is to identify genes that are differentially expressed in response to different environmental conditions. These experiments are constructed under the assumption that the differentially expressed genes are functionally important in the environment where they are induced. However, whether differential expression is predictive of functional importance has yet to be tested. Here we have addressed this expectation by employing Caenorhabditis elegans as a model for the interaction of native soil nematode taxa and soil bacteria. Using transcriptional profiling, we identified candidate genes regulated in response to different bacteria isolated in association with grassland nematodes or from grassland soils. Many of the regulated candidate genes are predicted to affect metabolism and innate immunity suggesting similar genes could influence nematode community dynamics in natural systems. Using mutations that inactivate 21 of the identified genes, we showed that most contribute to lifespan and/or fitness in a given bacterial environment. Although these bacteria may not be natural food sources for C. elegans, we show that changes in food source, as can occur in environmental disturbance, can have a large effect on gene expression, with important consequences for fitness. Moreover, we used regression analysis to demonstrate that for many genes the degree of differential gene expression between two bacterial environments predicted the magnitude of the effect of the loss of gene function on life history traits in those environments

RNAi Screen of DAF-16/FOXO Target Genes in C. elegans Links Pathogenesis and Dauer Formation

The DAF-16/FOXO transcription factor is the major downstream output of the insulin/IGF1R signaling pathway controlling C. elegans dauer larva development and aging. To identify novel downstream genes affecting dauer formation, we used RNAi to screen candidate genes previously identified to be regulated by DAF-16. We used a sensitized genetic background [eri-1(mg366); sdf-9(m708)], which enhances both RNAi efficiency and constitutive dauer formation (Daf-c). Among 513 RNAi clones screened, 21 displayed a synthetic Daf-c (SynDaf) phenotype with sdf-9. One of these genes, srh-100, was previously identified to be SynDaf, but twenty have not previously been associated with dauer formation. Two of the latter genes, lys-1 and cpr-1, are known to participate in innate immunity and six more are predicted to do so, suggesting that the immune response may contribute to the dauer decision. Indeed, we show that two of these genes, lys-1 and clc-1, are required for normal resistance to Staphylococcus aureus. clc-1 is predicted to function in epithelial cohesion. Dauer formation exhibited by daf-8(m85), sdf-9(m708), and the wild-type N2 (at 27°C) were all enhanced by exposure to pathogenic bacteria, while not enhanced in a daf-22(m130) background. We conclude that knockdown of the genes required for proper pathogen resistance increases pathogenic infection, leading to increased dauer formation in our screen. We propose that dauer larva formation is a behavioral response to pathogens mediated by increased dauer pheromone production

Candida albicans Infection of Caenorhabditis elegans Induces Antifungal Immune Defenses

Candida albicans yeast cells are found in the intestine of most humans, yet this opportunist can invade host tissues and cause life-threatening infections in susceptible individuals. To better understand the host factors that underlie susceptibility to candidiasis, we developed a new model to study antifungal innate immunity. We demonstrate that the yeast form of C. albicans establishes an intestinal infection in Caenorhabditis elegans, whereas heat-killed yeast are avirulent. Genome-wide, transcription-profiling analysis of C. elegans infected with C. albicans yeast showed that exposure to C. albicans stimulated a rapid host response involving 313 genes (124 upregulated and 189 downregulated, ∼1.6% of the genome) many of which encode antimicrobial, secreted or detoxification proteins. Interestingly, the host genes affected by C. albicans exposure overlapped only to a small extent with the distinct transcriptional responses to the pathogenic bacteria Pseudomonas aeruginosa or Staphylococcus aureus, indicating that there is a high degree of immune specificity toward different bacterial species and C. albicans. Furthermore, genes induced by P. aeruginosa and S. aureus were strongly over-represented among the genes downregulated during C. albicans infection, suggesting that in response to fungal pathogens, nematodes selectively repress the transcription of antibacterial immune effectors. A similar phenomenon is well known in the plant immune response, but has not been described previously in metazoans. Finally, 56% of the genes induced by live C. albicans were also upregulated by heat-killed yeast. These data suggest that a large part of the transcriptional response to C. albicans is mediated through “pattern recognition,” an ancient immune surveillance mechanism able to detect conserved microbial molecules (so-called pathogen-associated molecular patterns or PAMPs). This study provides new information on the evolution and regulation of the innate immune response to divergent pathogens and demonstrates that nematodes selectively mount specific antifungal defenses at the expense of antibacterial responses

Pseudomonas aeruginosa Suppresses Host Immunity by Activating the DAF-2 Insulin-Like Signaling Pathway in Caenorhabditis elegans

Some pathogens have evolved mechanisms to overcome host immune defenses by inhibiting host defense signaling pathways and suppressing the expression of host defense effectors. We present evidence that Pseudomonas aeruginosa is able to suppress the expression of a subset of immune defense genes in the animal host Caenorhabditis elegans by activating the DAF-2/DAF-16 insulin-like signaling pathway. The DAF-2/DAF-16 pathway is important for the regulation of many aspects of organismal physiology, including metabolism, stress response, longevity, and immune function. We show that intestinal expression of DAF-16 is required for resistance to P. aeruginosa and that the suppression of immune defense genes is dependent on the insulin-like receptor DAF-2 and the FOXO transcription factor DAF-16. By visualizing the subcellular localization of DAF-16::GFP fusion protein in live animals during infection, we show that P. aeruginosa–mediated downregulation of a subset of immune genes is associated with the ability to translocate DAF-16 from the nuclei of intestinal cells. Suppression of DAF-16 is mediated by an insulin-like peptide, INS-7, which functions upstream of DAF-2. Both the inhibition of DAF-16 and downregulation of DAF-16–regulated genes, such as thn-2, lys-7, and spp-1, require the P. aeruginosa two-component response regulator GacA and the quorum-sensing regulators LasR and RhlR and are not observed during infection with Salmonella typhimurium or Enterococcus faecalis. Our results reveal a new mechanism by which P. aeruginosa suppresses host immune defense