Title: From sovereign debt to sovereign default? On the conditions of governmental (il)liquidity and the proposals for deal- ing with sovereign debt crises
Abstract: The increase of sovereign debt and the crisis in the Euro zone led to a public discussion about the possibility of a sovereign default. But it did not become clear when a government default happens and what are its causes. This paper shows why the criteria for a default in the private sector are not applicable to the government sector. Furthermore, by means of looking at the development in the Euro zone, it is shown that for a government defaulting on its debt the amount of sovereign debt is not crucial; the essential question is whether a government is able to borrow in its own currency and – if that is not the case – the amount of international debt of the whole country, that is, its net international investment position.
Publication Year: 2014
Publication Date: 2014-01-01
Language: en
Type: article
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