Sovereign Defaults and Restructurings

Sovereign Defaults and Restructurings
September 28, 2015

Sovereign default and restructuring (of debt) looks like it will become a topic of interest going forward, so it would be good to get a little background on the history here.

A “default” means that a borrower (in this case, a government) does not make a scheduled debt payment on time.

A “restructuring” is an agreement between borrowers (governments) and lenders (government bond holders) to change the terms of the debt. Typically, this involves some combination of a reduction in principal, a change in maturity (typically longer), and a change in interest payments (typically lower).

Already, the IMF proposed making Greece’s sovereign debt payable in thirty years with low (or no) interest.

With all that in mind, here’s a neat database from the Bank of Canada. It’s a record of sovereign defaults of all countries worldwide since 1975.

The real action is in an excel spreadsheet, here:

As for restructurings, the NBER has a nice database with at least 153 sovereign debt restructurings since 1980.

None of this requires any new currencies, of course. It’s really no different than an individual who defaults on a credit card debt, and then gets a call from an agency that offers to accept $0.10 on the dollar to resolve the debt.

July 12, 2015: Greece Is On The Brink Of Disaster — Or Raging Success
June 25, 2015: Greece: Planning The Bank Holiday
June 5, 2015: Greece: It’s Time For Your Default and Debt Restructuring
May 28, 2015: Greece’s 1-2-3 Plan For Default and Amazing Recovery
April 3, 2015: The Greek Government’s Revenue Would Rise — Immediately — After Tax Reform
March 26, 2015: Greece Needs the Magic Formula to Become the Wealthiest Country in the Eurozone
March 19, 2015: Greece Could Rise To Greatness, Or Become The Next Venezuela
March 12, 2015: Greece’s Syriza Could Launch a Libertarian Revolution
February 26, 2015: Greece’s Monetary Options