What happens when a country doesn’t pay its debts?

Question

Can they just ignore the debt like it never existed? Are there real reprucussions for the government or impacts to the econony?

In: 467

Answer 1

Others have explained the technical consequences. What I’ve noticed happens from my admittedly brief studies of international political economy is that the IMF swoops in like carrion birds and holds the country ransom, promising bail-out funds in exchange for restructuring the country’s economy (and usually implementing severe austerity measures). This usually ends up privatizing industries and paves the way for multi-national corporations to set up shop. While direct foreign investment of multi-nationals can be a good thing, those companies are usually only interested in exploiting a desperate populace.