Can they just ignore the debt like it never existed? Are there real reprucussions for the government or impacts to the econony?
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So it’s worth asking who they owe debts to. Quite a lot of government debt is owned by foreign countries but a lot of it is also owned by its citizens in the form of bonds.
In the UK people can buy Premium Bonds, for each bond owned they have a chance to win a cash prize each month. So if a government didn’t pay it’s debts it would be the citizens who lose out.
Where a foreign power owns the debt it plays out a little differently. There is often no direct consequence of not paying debts but the country that owns that debt may put punishing tax duties on products imported from that nation, they may up the cost of products they send to it. It could result in that country having less bargaining power on the world stage. These can have a knock on effect on the countries economy and result it price inflation or shortages for the public.
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