Extrapolative optimism about the international financial market's ability to cope with developing countries' debt problems is false and dangerous. Governments must recognise the seriousness of the risk of default by some heavily indebted middle income countries, which would lead to international monetary and economic contraction. The worst sufferers would be the poorest developing countries and banks and firms in the OECD countries. Reform of the system must involve OPEC in a twin approach to debt guarantees and placement of surpluses.