How to Default on Sovereign Debt

They know that debt default would be disruptive.

CAMBRIDGE Greece will default on its national debt.

BEIJING In the last 200 years, there have been more than 250 cases of sovereign debt default, and 68 cases of domestic debt default.

Obviously, markets still believe that Greece will default on its debt.

LONDON Everyone knows that Greece will default on its external debt.

Therefore governments rarely default on the entire value of their debt.

In December 2001, the Government declared default on its external debt.

The only way out is for Greece to default on its sovereign debt.

Massive speculation and borrowing led to excessive debt burdens and ultimately, to default.

Investors were not worried about default risk on Spanish or Irish sovereign debt, or about Italy s chronically large sovereign debt.

There, too, governments widely guaranteed private sector debt, and then proceeded to default on it.

What are the consequences for Italy if Greece should default on its debt? MARlO MONTl

Or it could be a soft default in which Greece unilaterally services its existing debt with new debt rather than paying in cash.

With lower nominal income and the same level of debt, the threat of default necessarily increases.

If these diligent payers are eventually expected to default, writing down their debt today makes sense.

A similar battle is now brewing about America s debt ceiling, which, if unresolved, introduces the risk of a technical default on US public debt.

The risk of default or debt restructuring induces creditors to be more careful in their lending decisions.

Perhaps Italy can survive, because most of its debt is held domestically, which makes default less likely.

The best way to get rid of debt (short of default) is to grow out of it.

This time was not different. Massive speculation and borrowing led to excessive debt burdens and ultimately, to default.

Something started to cause investors to fear that Greek debt had a slightly higher risk of eventual default.

A US Congress engaged in political grandstanding might fail to raise the debt ceiling, triggering a technical default.

However, the problem arises when the debt becomes unsustainable and the country faces a risk of sovereign default.

One reason that banks oppose debt write downs is that many underwater homeowners continue to repay debt rather than default, even while cutting back on other spending.

That money must come from higher taxes, from eroding the real value of money balances and government debt through inflation, or from outright default and debt restructuring.

But not enough has been done to alleviate the burden of multilateral debt or to assist countries that, despite a large debt servicing burden, are not in default.

Its foreign debt would have declined in line with its GDP, thus sheltering the economy from default and economic disaster.

The crises in Ireland and Greece called into question the euro s viability and raised the prospect of a debt default.

In January 2011, Côte d Ivoire became the first country to default on its sovereign debt since Jamaica in January 2010.

This is not default in the usual sense because the debt is honored, albeit with currency of lesser real value.

So no matter how many drachma they say they're going to give, this would constitute a default on their debt.

Within a year of the Mexican default, what began as the debt problems of a small group of countries became a full blown international debt crisis, as debt servicing failures and reschedulings spread rapidly among the developing countries.

After the subprime crisis erupted, mortgage and consumer debt was paid down by households either with their savings or by default.

Modern finance has succeeded in creating a default dynamic of such stupefying complexity that it defies standard approaches to debt workouts.

After all, British public debt exceeded 250 of GDP in the aftermath of World War II, and Britain did not default.

This approach has several advantages by leaving the face value of the debt unaltered, EU officials could argue that restructuring Greece s debt did not amount to a default, thereby limiting contagion.

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