Sovereign Default

[otters]

There is much talk of countries that may default on their debt repayments, What exactly happens when such an event occurs?

[Caribbean Beauty]

There is much talk of countries that may default on their debt repayments, What exactly happens when such an event occurs?

2 things happen historically, either:

1. The country cannot pay so organises a restructuring of the debts, either alone or with help from IMF, world bank etc (as the UK did under Callaghan in the 70s);

or

2. The country sticks 2 fingers up and refuses to pay anything or restructure - what one might call a "Sovereign-Chav Default". Actually I do not know of any details of this happening but I am sure it has, someone can chip in. Probably some strapped 3rd world/dictatorships have done this in the past?

Either way, the country is screwed and cannot use the international money markets to raise funds again for many years or decades, usually.

[LJAR]

There have been many sovreign defaults over the last few decades. Russia was the most recent major economy to default.

Esentially their bonds collapse in value and they only pay out a fraction of the interest that the coupon is nominally worth.

[pandabear]

There have been many sovreign defaults over the last few decades. Russia was the most recent major economy to default.

Esentially their bonds collapse in value and they only pay out a fraction of the interest that the coupon is nominally worth.

As i dont possess any of these coupons, how does it affect me?

[otters]

As i dont possess any of these coupons, how does it affect me?

Neither do I. So what would happen to bank guarantees, things like NS&i savings, and government financed projects. I remember reading several years ago about the financial crisis in Hungry, where some folks were paid in pickled gherkins.