Sovereign Debt and Default - A History

Download PDF The ongoing sovereign debt crisis in Europe continues to weigh heavily on credit markets and political systems throughout the developed world. Greece, after racking up years of unsustainable fiscal deficits, recently defaulted on Euro-denominated bonds held by banks and other investors, and many experts continue to worry about the sovereign debt of much larger European governments like Portugal, Italy and Spain.

For Americans, the idea of sovereign default is more closely associated with Third World emerging economies, not Europe. But finance expert Alex Pollock notes otherwise. In a recent paper published by the American Enterprise Institute, Pollock points out that history is littered with sovereign debt defaults by developed nations - including European countries and even the United States.

OUTLOOK asked Pollock for his perspective on the current sovereign debt crisis - and the lessons history offers about what's happening in Europe today.