38 ms·

What recourse do the creditors have when Greece defaults? Invade the country and physically reposes assets? How is this different from borrowing money from a b

What recourse do the creditors have when Greece defaults? Invade the country and physically reposes assets? How is this different from borrowing money from a bank and not paying, except being a country and all.

doktrin 11y ago
https://en.wikipedia.org/wiki/Sovereign_default https://en.wikipedia.org/wiki/Sovereign_default
drzaiusapelord 11y ago
They can kick them out of the EU/Eurozone and implement tariffs that will pay off these debts. It'll take decades but its doable if the Greek economy doesn't completely collapse.
- beat 11y ago
  And there's the rub... the best way to get the debt repaid is to help the Greek economy recover, but prioritizing debt repayment over economic recovery drives the economy even farther downhill. And turning Greece into an economic pariah state with tariffs and other punitive measures is definitely a step in that direction. How are they supposed to recover if they can't engage in free trade? They could pull a Cuba and create a completely introverted economy - poor, but independent. But if they're doing that, why the hell should they kowtow to the EU or anyone else?
- sgift 11y ago
  No, they cannot. I have no idea where this lie started, but repeating it won't make it true: There is NO mechanism to kick Greece out of the EU/Eurozone and when the other governments try to do it the european courts will stop them.
  - cjensen 11y ago
    The EU Treaty has rules regarding government debt. Greece violated the treaty by running a bigger deficit than permitted. Additionally, the Treaty does not allow for default on debt. The EU courts will require repayment. Your suggestion that the EU courts will stop a breakup with a country which is in complete violation of EU law is optimistic.
    - sgift 11y ago
      The consequences of breaking these rules are clearly defined, being forced to leave the union is not one of them. The european courts can force Greece to pay a fine if they decide that this is warranted. That is all. You cannot simply redefine the fines of a law after the law has been broken.
    - kawakiole 11y ago
      The treaty says nothing about default, and say absolutely nothing about the possibility of expulsion if a member goes over the deficit limit (or under any other circumstance by that matter), which by the way already happened to many countries including France without any major consequence. Next time, you might want to actually read the treaty before commenting on it.
- sergiosgc 11y ago
  This is completely false. Formally, there are no provisions for expelling a country from the EU or the Eurozone.
beat 11y ago
For a recent case study, look at Argentina's default and the restructuring of its debt - 12 years running now, from 2002 to 2005 and most recently 2014. Part of the issue with Argentina - and I suspect there are similar issues with Greece - is that a significant chunk of the debt (7%) was held by US-based hedge funds that then used the US government to undermine the 2005 restructuring and force payments that Argentina couldn't afford. Just think about the sort of financial leeches that a situation like this attracts. It really puts the whinging about commies here in perspective.
- evanpw 11y ago
  Something to note: Argentina issued those bonds under New York law because they could get better terms on debt enforced by the US judicial system than on debt enforced by Argentinian courts. Also "used the US government" makes things sound worse than they are. What the hedge funds actually did was sue Argentina in the jurisdiction in which the bonds were issued, and win. (Though the ruling is widely criticized.)
  - AnimalMuppet 11y ago
    So they issued under New York law to get lower interest rates (because creditors/bond buyers felt that the law gave them more security, because it made it harder for Argentina to skate on the debt). Then Argentina defaulted. Hey, it happens. You didn't get any guarantee by buying a bond issued under New York law, you just got a better legal treatment if Argentina happened to default. But Argentina said, "We can't abide by the rules imposed on us by New York law; that's too expensive. Here's how much we can actually pay. Take it or leave it." Most of the creditors took it. But some speculators thought that they could use New York law as a club to force Argentina to give them more money. So they bought up a bunch of Argentina's debt (at a price that was set by everybody else's expectation, which was set by what Argentina said it could actually pay, which means it was a really low price.) Then they sued Argentina, under New York law, to try to force them to pay the speculators more than they paid everyone else. The speculators won in court. Argentina refused to pay them, but paid everyone else. The courts in the US refused to let Argentina's agent in the US pay the other bondholders, because Argentina wasn't paying the speculators what the court judgment said that they had to pay them. I can't find much to cheer for on either side of this. Argentina made a mess of their finances by bad government, and is being stubborn. The speculators are greedy vultures. But I note that it's really hard to force a sovereign government to pay you if they really don't want to...
afterburner 11y ago
When people or companies go bankrupt, creditors often get little to nothing back. That's the the risk part of risk/reward. Invasions are illegal.
- msandford 11y ago
  Invasions are illegal per EU law, or international law, or what? Because I think there have been some big wars in the last 100 years. Remember that you're talking about institutions that have the MONOPOLY ON VIOLENCE in their respective lands. Those are the kinds of institutions that tend not to take "no" for an answer; they're used to being the final word on something. That's what a war is, two institutions that have respective monopolies on violence figuring out through violence which one is going to be in charge.
  - AnimalMuppet 11y ago
    There's a difference between having a local monopoly on violence, and using violence outside your local monopoly.
    - msandford 11y ago
      Which the US has been doing for many decades now. WWI, WWII, Korea, Vietnam, Iraq War 1, Iraq War 2, Afghanistan, Somalia, etc. I'm not saying that it's MORALLY right in any or all cases. But I am saying that talking about something which is illegal -- in the context of international relations -- is really silly. Governments answer only to power, and maybe not even to that. In order to talk about something being illegal you really need to have an institution with authority over both sides of the dispute. The UN is SUPPOSED to have that, but the UN doesn't have its own standing army so it can't really impose its will on the various countries that make it up. So while it might be TECHNICALLY illegal to start a war, in practice it's not. Especially if you're the victor.
      - afterburner 11y ago
        Parent commenter asked "What recourse do the creditors have". If you aren't constraining yourself withing legal frameworks, then the answer can be "whatever you want". But I doubt that's what they meant. Unless they were asking for permission to invade Greece? But I wanted to head off the implication that somehow debtors deserve this kind of treatment. Being in debt is not a violent act against the creditors. It's not a crime. So people should stop themselves from thinking that almost anything is justified in recovering debts. That thinking is what led to debtor jails, the practice of which was outlawed for a reason.
smackfu 11y ago
Similar to a person going bankrupt: it's really hard to get loans in the future.
- msandford 11y ago
  Not really. Russia defaulted in 1998 and had no trouble raising more debt. After they defaulted they suddenly had some free cash flow with which to be able to pay their new debts, and so they looked like a much better risk. https://en.wikipedia.org/wiki/1998_Russian_financial_crisis https://en.wikipedia.org/wiki/1998_Russian_financial_crisis At the government level people are mostly just looking for ability to service. When you're spending 50% of tax revenue on existing debt payments, you don't look like a good risk. When you're spending 0% of tax revenue on existing debt payments, you look like an excellent risk. It's super wacky, but that's seemingly how it works.

doktrin 11y ago

https://en.wikipedia.org/wiki/Sovereign_default https://en.wikipedia.org/wiki/Sovereign_default

drzaiusapelord 11y ago

They can kick them out of the EU/Eurozone and implement tariffs that will pay off these debts. It'll take decades but its doable if the Greek economy doesn't completely collapse.

beat 11y ago
And there's the rub... the best way to get the debt repaid is to help the Greek economy recover, but prioritizing debt repayment over economic recovery drives the economy even farther downhill. And turning Greece into an economic pariah state with tariffs and other punitive measures is definitely a step in that direction. How are they supposed to recover if they can't engage in free trade? They could pull a Cuba and create a completely introverted economy - poor, but independent. But if they're doing that, why the hell should they kowtow to the EU or anyone else?
sgift 11y ago
No, they cannot. I have no idea where this lie started, but repeating it won't make it true: There is NO mechanism to kick Greece out of the EU/Eurozone and when the other governments try to do it the european courts will stop them.
- cjensen 11y ago
  The EU Treaty has rules regarding government debt. Greece violated the treaty by running a bigger deficit than permitted. Additionally, the Treaty does not allow for default on debt. The EU courts will require repayment. Your suggestion that the EU courts will stop a breakup with a country which is in complete violation of EU law is optimistic.
  - sgift 11y ago
    The consequences of breaking these rules are clearly defined, being forced to leave the union is not one of them. The european courts can force Greece to pay a fine if they decide that this is warranted. That is all. You cannot simply redefine the fines of a law after the law has been broken.
  - kawakiole 11y ago
    The treaty says nothing about default, and say absolutely nothing about the possibility of expulsion if a member goes over the deficit limit (or under any other circumstance by that matter), which by the way already happened to many countries including France without any major consequence. Next time, you might want to actually read the treaty before commenting on it.
sergiosgc 11y ago
This is completely false. Formally, there are no provisions for expelling a country from the EU or the Eurozone.

beat 11y ago

For a recent case study, look at Argentina's default and the restructuring of its debt - 12 years running now, from 2002 to 2005 and most recently 2014. Part of the issue with Argentina - and I suspect there are similar issues with Greece - is that a significant chunk of the debt (7%) was held by US-based hedge funds that then used the US government to undermine the 2005 restructuring and force payments that Argentina couldn't afford. Just think about the sort of financial leeches that a situation like this attracts. It really puts the whinging about commies here in perspective.

evanpw 11y ago
Something to note: Argentina issued those bonds under New York law because they could get better terms on debt enforced by the US judicial system than on debt enforced by Argentinian courts. Also "used the US government" makes things sound worse than they are. What the hedge funds actually did was sue Argentina in the jurisdiction in which the bonds were issued, and win. (Though the ruling is widely criticized.)
- AnimalMuppet 11y ago
  So they issued under New York law to get lower interest rates (because creditors/bond buyers felt that the law gave them more security, because it made it harder for Argentina to skate on the debt). Then Argentina defaulted. Hey, it happens. You didn't get any guarantee by buying a bond issued under New York law, you just got a better legal treatment if Argentina happened to default. But Argentina said, "We can't abide by the rules imposed on us by New York law; that's too expensive. Here's how much we can actually pay. Take it or leave it." Most of the creditors took it. But some speculators thought that they could use New York law as a club to force Argentina to give them more money. So they bought up a bunch of Argentina's debt (at a price that was set by everybody else's expectation, which was set by what Argentina said it could actually pay, which means it was a really low price.) Then they sued Argentina, under New York law, to try to force them to pay the speculators more than they paid everyone else. The speculators won in court. Argentina refused to pay them, but paid everyone else. The courts in the US refused to let Argentina's agent in the US pay the other bondholders, because Argentina wasn't paying the speculators what the court judgment said that they had to pay them. I can't find much to cheer for on either side of this. Argentina made a mess of their finances by bad government, and is being stubborn. The speculators are greedy vultures. But I note that it's really hard to force a sovereign government to pay you if they really don't want to...

afterburner 11y ago

When people or companies go bankrupt, creditors often get little to nothing back. That's the the risk part of risk/reward. Invasions are illegal.

msandford 11y ago
Invasions are illegal per EU law, or international law, or what? Because I think there have been some big wars in the last 100 years. Remember that you're talking about institutions that have the MONOPOLY ON VIOLENCE in their respective lands. Those are the kinds of institutions that tend not to take "no" for an answer; they're used to being the final word on something. That's what a war is, two institutions that have respective monopolies on violence figuring out through violence which one is going to be in charge.
- AnimalMuppet 11y ago
  There's a difference between having a local monopoly on violence, and using violence outside your local monopoly.
  - msandford 11y ago
    Which the US has been doing for many decades now. WWI, WWII, Korea, Vietnam, Iraq War 1, Iraq War 2, Afghanistan, Somalia, etc. I'm not saying that it's MORALLY right in any or all cases. But I am saying that talking about something which is illegal -- in the context of international relations -- is really silly. Governments answer only to power, and maybe not even to that. In order to talk about something being illegal you really need to have an institution with authority over both sides of the dispute. The UN is SUPPOSED to have that, but the UN doesn't have its own standing army so it can't really impose its will on the various countries that make it up. So while it might be TECHNICALLY illegal to start a war, in practice it's not. Especially if you're the victor.
    - afterburner 11y ago
      Parent commenter asked "What recourse do the creditors have". If you aren't constraining yourself withing legal frameworks, then the answer can be "whatever you want". But I doubt that's what they meant. Unless they were asking for permission to invade Greece? But I wanted to head off the implication that somehow debtors deserve this kind of treatment. Being in debt is not a violent act against the creditors. It's not a crime. So people should stop themselves from thinking that almost anything is justified in recovering debts. That thinking is what led to debtor jails, the practice of which was outlawed for a reason.

smackfu 11y ago

Similar to a person going bankrupt: it's really hard to get loans in the future.

msandford 11y ago
Not really. Russia defaulted in 1998 and had no trouble raising more debt. After they defaulted they suddenly had some free cash flow with which to be able to pay their new debts, and so they looked like a much better risk. https://en.wikipedia.org/wiki/1998_Russian_financial_crisis https://en.wikipedia.org/wiki/1998_Russian_financial_crisis At the government level people are mostly just looking for ability to service. When you're spending 50% of tax revenue on existing debt payments, you don't look like a good risk. When you're spending 0% of tax revenue on existing debt payments, you look like an excellent risk. It's super wacky, but that's seemingly how it works.