Can they just ignore the debt like it never existed? Are there real reprucussions for the government or impacts to the econony?
In: 467
The main thing is that if you stop paying your debts other people will be less willing to loan you any more money.
You can’t really force a sovereign government to pay back any debts it doesn’t want to (unless you start a war over it), but you can stop giving them more money.
In the past when a government has defaulted and did the country equivalent of declaring bankruptcy, they soon afterwards found themselves in the position where the again needed money, but nobody was willing to loan them any because of the high risk that they wouldn’t pay the loan back again.
In response the country needed to raise the interest they were willing to pay much, much higher, which only helped pull them further into debt.
The impact on the economy for this can be huge and very bad.
Latest Answers