http://www.npr.org/2011/10/09/141195893/when-a-country-defaults-who-comes-knocking?ps=cprs
When A Country Defaults, Who Comes Knocking?
October 9, 2011
We all know what happens when individuals stop paying their bills: angry letters, pestering phone calls and possibly getting property repossessed. In the end, you might declare bankruptcy and start again. That's how it works for a person up to his eyeballs in debt, but how does it work for an entire country?
Harvard economist Ken Rogoff says that it's not unusual for countries to go into default. In fact, he says it's happened hundreds of times.
"A lot of countries have gone bankrupt and they don't even know it; it's not even in their history books," Rogoff told weekends on All Things Considered host Robert Smith. "Most countries have gone bankrupt at least a couple of times."
The reason lenders continue to do business with a country is that, unlike businesses or individuals, a country can't go out of business and continues to pay at least something to its creditors, Rogoff says.
He says there are many ways a country deals with a sovereign default, but most often its finance minister simply declares it does not have the money to pay back lenders.
"There isn't unfortunately a pretty way to do it. It is a big event when a country defaults on it foreign lenders," Rogoff says. "That said there are times when there's just not a better direction to turn." ..........
Russia, August 1998 - A massive $72 billion default that rattled the entire global economy. The trouble started in August '98 when the country missed payments on local treasury obligations, and later its foreign currency obligations and foreign currency bonds. Russia's debts were eventually restructured in later years
Uruguay, May 2003 - Argentina's troubles spread to Uruguay, where the government defaulted on $5.7 billion worth of debt in May 2003. The country eventually completed a restructuring of its debt obligations with bondholders
Dominican Republic, April 2005 - Defaulted on $1.62 billion worth of debt in April 2005. Eventually completed a debt restructuring that ended up extending the maturity of its debt obligations by five years
Ecuador, December 2008 - Defaulted on $3.2 billion worth of debt obligations after calling several of its previous debt offerings "illegal and illegitimate." An unusual situation in that Ecuador is thought to have the resources not to default, but chose instead to default for "moral" reasons
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