Causes
According to financial historian Edward Chancellor past instances of sovereign default have tended to occur under some or all of the following circumstances:
- A reversal of global capital flows
- Unwise lending
- Fraudulent lending
- Excessive foreign debts
- A poor credit history
- Unproductive lending
- Rollover risk
- Weak revenues
- Rising interest rates
- Terminal debt
A significant factor in sovereign default is the presence of significant debts owed to foreign investors who are unable to counter such actions in another nation's political processes or otherwise (e.g., via support from their own government(s) or supranational courts); the enforcement of creditor's rights against sovereign states is frequently difficult. Such willful defaults (the equivalent of strategic bankruptcy by a company or strategic default by a mortgager, except without the possibility of the exercise of normal creditor's rights such as asset seizure and sale) can be considered a variety of sovereign theft; this is similar to expropriation (including inadequate repayment for the exercise of eminent domain).
Read more about this topic: Sovereign Default