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.

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.)

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...

Yes, it's definitely more complicated than my simplistic presentation. But the point stands, I think... nation-level financial crisis draws a certain kind of vulture capitalist who will exploit the crisis and then enforce misery at gunpoint through the long arms of compliant governments.

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

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

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.

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.

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?

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.

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.

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.

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.

This is completely false. Formally, there are no provisions for expelling a country from the EU or the Eurozone.

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.

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.

There's a difference between having a local monopoly on violence, and using violence outside your local monopoly.

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.

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.

Right, but the idea that there is a useful, workable legal framework that's used to resolve disputes between countries is laughable. I know the UN exists and I know that's what it's SUPPOSED to be. But given the lack of any entity to enforce the UN's resolutions or findings or declarations, it's a toothless entity. And that means whatever judgements the UN makes aren't really binding. And that makes them EFFECTIVELY useless. I'm not saying the people there are useless, or that what they're doing isn't noble. Just that without the guns to make people accept it, countries can and do, do whatever they want.

There isn't much law between nations, really. There are conventions and agreements that countries generally tend to adhere to, but only out of mutual benefit, like policies regarding ambassadors or consulates or the conduct of soldiers in war. And those routinely get violated if people think they can get away with it and usually they can.

https://en.wikipedia.org/wiki/International_law#Supranationa...

You're side-stepping my main point: when a country defaults, you don't "get" to screw over its inhabitants just because you want to squeeze a little more money out. You can try, but it's not "right".

Re: UN, the UN is not a government, it's a negotiating table. It has value to local politicians when something is agreed to at the negotiating table. It has value as a table everyone is always at, disagreement or no.

> You're side-stepping my main point: when a country defaults, you don't "get" to screw over its inhabitants just because you want to squeeze a little more money out. You can try, but it's not "right".

I don't believe I did side-step it, so let me try a little harder.

When it comes to the affairs between two countries, there are probably a bunch of things that are morally right and wrong. And there are other things which the countries agree to do or not do by treaty, convention, and the like.

But just because a thing is immoral or against convention or what have you, that in no way precludes a country from doing it. Similarly, just because a country is supposed to do a thing as per a convention or because of entirely upright moral reasons, again, nothing forces them to.

So while I agree with you that nothing really gives a country the "right" to do anything, that has little to no bearing on what countries ACTUALLY DO.

Which is why I continue to insist that what SHOULD happen and what WILL happen may have no bearing on one another at all.

Further, in order to have a "legal framework" in the affairs between two countries, you have to have a superseding authority. Which doesn't exist. So the idea that any kind of legal framework does exist which governs their affairs is a fiction. There are some institutions which have the appearance of a superseding authority like the EU or the UN. But the EU has never really been tested by violence so we have no idea if the other member countries will enforce EU decisions with force. And the UN has already proven itself toothless many times over.

So again, I'm not saying that it would be RIGHT for Greece's creditors to invade to force repayment, I am saying that it MIGHT happen. And that it MIGHT be illegal, or it might not. It depends on who wins since the victors write the history.

I, uh, am pretty sure that no one in Brussels are used to having the last word on anything. That's why everyone moans about the place.

Right, because they're not a real government. If you can't MAKE people do something they don't want to, you're not the final word. And if you're not the final word, you're not the government. This is why the UN is a nice idea in theory, but utterly useless in practice.