Sovereign Default
Stony-broke - over and over
language

Looking back through history, a sovereign default is not very rare. It does happen sometimes, even though a state can pay its bills. By BENJAMIN FREDRICH



Translated by Gunnar Ahrens and Christine Crawford.

Over the last 200 years, South American states have often been insolvent. Germany1 and Austria-Hungary have both also experienced a few periods of solvency caused by war. However, a sovereign default doesn't have to mean that a state is unable to pay their debts back.

If a state is insolvent it can't or won't pay back its debts. This can mean that a state is able, but doesn't want to pay back its debts. It could mean that the state wants to end up in sovereign default.2

This mostly occurs if there is a change in government, as this could result in the new government not wanting to pay back the debts, which were taken on by the previous government. In this situation, a forced bankruptcy occurs, which means that the new government doesn't have to fight the creditors, but has to fight the politicians who originally took on the debts.

Taking the above into account, the new Greek Government are not fighting the EU, they are fighting former Greek governments.



[1] Prussia and Germany
[2] For example, Argentina in 2002


20.04.2015

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