The national bankruptcy (even sovereign default ) is the de facto cessation of due payments or the formal declaration of a government , overdue receivables not ( English repudiation to meet or) only partially. The terms bankruptcy and insolvency are used synonymously in this context.
The general legal principle “You have money to have” applies not only to German civil law, but also to international law with particular rigor. Scarcity of money does not justify refusal to pay. But if the debtor has no money, the only option is foreclosure / insolvency ( monetary debt , (1) BGB).
While bankruptcies of companies or natural persons are the subject of national bankruptcy law, state bankruptcy is not provided for by law. On the one hand, this is due to the fact that the state, as a superordinate entity, does not provide for any insolvency rules for itself or even excludes itself from general insolvency rules. In Germany, according to the express regulation of InsO , insolvency proceedings do not take place over federal assets; He is therefore - like large parts of the public sector subordinate to him - incapable of bankruptcy . On the other hand, there are also no supranational bankruptcy rules that deal with state bankruptcy. States themselves are the highest authority and, as genuine subjects of international law, cannot be subject to any insolvency proceedings. In addition, the inability of states to become insolvent is explained from an economic point of view with their potentially unlimited sources of state income . In 1993 the EU Commission assumed in its EFIM subsidy decision that the state had “immeasurable financial resources” and that it therefore had a special role in economic life. In addition, state bankruptcy is simply incompatible with state sovereignty . However, this is counteracted by the strict policy of the IMF ( conditionality ), which demands drastic cuts in everyday social and economic life from debtor states and thus interferes with sovereignty. From these premises the dogma of the insolvency of states is ultimately derived.Paragraph 1 No. 1
The non-constitutive statutory insolvency provisions in Germany do not match the inability of the state and government agencies to pay. The decisive difference between insolvency and national bankruptcy is the forward-looking approach; Insolvency law is the reaction of the legal system to the failure of market participants, with the state proving to be the market guarantor. The national debt brakes ( , and Basic Law ) and TFEU are decisive preventive instruments for preventing national bankruptcy in Germany . However, they only affect budget crises and are therefore not intended as an indicator of a state of emergency.
In May 2007, the Federal Constitutional Court (BVerfG) ruled in connection with the unilaterally declared payment moratorium in Argentina in favor of several suing government bond creditors that no general rule of international law could be ascertained that would entitle a state towards private individuals to meet due private law payment claims based on insolvency to temporarily refuse declared state emergency . The general principles of state emergency are not specified in such a way that they can be applied directly to cases of insolvency and a derived justification for a breach of contract. A state of emergency exists when essential interests of the state are at risk. It follows from international judicature and doctrine that a state can also invoke state emergency in economic and financial emergencies. The objection of a state of emergency is a specific form of state bankruptcy, with which international attempts are made not to meet due payment obligations. In the literature on international law, a state emergency is not affirmed when it is economically impossible for the state to pay its debts. There must be other, special circumstances that show that the fulfillment of payment obligations would be self-destructive, for example because basic state functions (health care, administration of justice, schooling) can no longer be fulfilled because of debt servicing.
The judgment expresses the strict separation between international law and private law, which is largely no longer represented in international law. A suspension of interest and repayment payments based on a state of emergency must, however, meet high requirements and presuppose that this is "the only possibility for the state to protect an essential interest from serious and imminent danger" (Art. 25 para. 1a) ILC ASR). The Committee on International Monetary Law of the International Law Association (ILA) has tried, taking into account the rulings of international courts and arbitration tribunals as well as the literature on international law, to specify the broad concept of "essential interest" with regard to payment crises in a debtor country. It has come to the conclusion that in the event of the insolvency of a debtor state, a temporary suspension of payments for the purpose of debt rescheduling may be permissible if the state would otherwise have essential tasks of services of general interest, guaranteeing internal peace, the survival of part of its population and, finally, environmental conservation his national territory can no longer guarantee. These high hurdles to failure-related payment refusals are reached in very few cases of a debt crisis. If a state rightly invokes this, only a suspension of the payment obligations is provided, ie a deferment and no final debt relief (Art. 27 (a) ILC ASR).
International law knows neither a uniform nor a codified bankruptcy law of the states. It is true that international agreements occasionally contain general emergency clauses; However, whether these relate to an economic emergency is just as much a matter of interpretation as the more detailed requirements for invoking the emergency in the event of insolvency in legal relationships under international and private law. According to the judgment of the Federal Constitutional Court of May 2007, the regulations governing the legal consequences of a state's insolvency are therefore of a fragmentary nature and could, if the corresponding consolidation can be demonstrated on the basis of international law criteria, only be assigned to customary international law or general legal principles. The relevant jurisprudence of international and national courts and the opinions of international legal literature do not allow the positive determination of a general rule of international law, according to which a state would be entitled to state responsibility beyond the scope of application of Art. 25 of the ILC articles, which is limited to international law relationships, according to the declaration of the In the event of a state of emergency due to insolvency, to temporarily refuse the fulfillment of due payment claims in private law relationships with private creditors. There is no uniform state practice that recognizes such a justification by virtue of international law.
In the social sciences, state bankruptcy / state insolvency is the non-fulfillment of state debt obligations, irrespective of whether this covers only individual or all debts. Social science distinguishes three types of state bankruptcy, namely legal, political and financial. In the legal case, the debtor state disputes legality by classifying the borrowing as unlawful under its domestic law and rejecting the debt obligations (“repudiation”). That was the case in Mississippi in January 1841 when the state made the issuance of $ 7 million bank bonds unconstitutional and refused to repay them. For the first time, the term “repudiation” was used for the non-recognition of debts. Politically motivated sovereign defaults are those cases in which new governments no longer feel bound by the debts of the previous government. In 1917 Russia refused to pay off the debts it had taken on by the Tsarist Empire (see Genoa Conference ). Both types are insignificant today. The financial state bankruptcy, on the other hand, is of sole importance today and is expressed by a (threatened) suspension of payments ( moratorium ). Almost every financially induced national crisis since 1995 (Mexico) has been preceded by the collapse of the national currency, which was usually rigidly linked to one or more reference currencies. Such ties, however, lead to excessive borrowing in foreign currency on the assumption that currency risk is excluded. The consequence was and is that more and more domestic currency has to be used for debt servicing due to devaluation (so-called balance sheet effect ).
State bankruptcy implies both economic causes of insolvency and over-indebtedness, but does not directly capture the (politically motivated) unwillingness to pay. Suspension of payments ( default ) and the threat of suspension of payments in the event that a debt rescheduling fails ( pre-default restructuring ) are clear signs of a financial crisis. Real payment suspensions (Argentina in January 2002) are usually justified with a state emergency. Argentina had therefore refused to pay off debts to private creditors, although the country later - still during the alleged state emergency - serviced the IMF loans and thus violated a pari passu clause .
International Monetary Law
International monetary law is characterized by the fact that it does not yet have an insolvency procedure for states, so that there are no internationally binding norms that could be used to classify a debtor state as insolvent. So far, only in the intergovernmental area or in relation to the leading international creditor banks has a certain practice emerged for overcoming payment crises. The usages developed in the Paris Club and the London Club are based on an amicable solution to the respective debt crisis by negotiation. Certain criteria for starting rescheduling negotiations (conditionality) have been developed there. A prerequisite for rescheduling negotiations in the Paris Club (which is also used by the creditor banks represented in the London Club) is an imminent default ("default") by the debtor state in servicing foreign liabilities ("imminent default criterion"). This is made dependent on a forecast by the International Monetary Fund about the development of the balance of payments for the following year. The conditionality sets u. a. requires that the debtor country is involved in an ongoing IMF program that includes a credit facility ( stand-by credit ). This in turn is made dependent on requirements ( conditionality ). The degree of debt rescheduling is then determined by the financing gap determined by the IMF.
The causes of national bankruptcies can be divided into two groups: National bankruptcy can be triggered if it becomes impossible to service existing liabilities ( over-indebtedness ). Furthermore, a national bankruptcy can be caused by a government's refusal to service existing liabilities.
Economically induced national bankruptcy: over-indebtedness
If a state (e.g. due to its macroeconomic situation) is no longer able to service its national debts in full, national bankruptcy occurs. Over-indebtedness occurs when creditors increasingly doubt the ability to service the liabilities. This is often caused by an existing high level of debt and thus by a permanent imbalance between government revenues and government spending.
Reasons for excessive government spending include high expenditures, particularly for armament , reparation payments or social benefits, as well as short-term expenditures to secure social peace or to rescue companies or banks caused by an economic or financial crisis .
The risk of a state becoming overindebted is increased if there is also a high currency risk in addition to a high country risk . As a result, a state may be forced to take on its national debt in foreign currency (so-called original sin ), which affects its creditworthiness. A devaluation of the domestic currency (and the associated increase in national debt in domestic currency units) can significantly accelerate the process of over-indebtedness. Conversely, a country whose currency is internationally accepted as a reserve currency can monetize an existing national debt.
Politically induced national bankruptcy: failure to service liabilities
In several cases, national bankruptcies were also triggered by a government's refusal to service existing liabilities (regardless of whether this would have been economically possible). Such political behavior is conditioned, among other things, by regime change. A change of government does not affect the commitments a state made prior to the change of government. Nonetheless, especially in revolutionary situations or after a change of regime, the new government describes the old government as illegitimate or the like and no longer serves the old debts with this justification or with this pretext.
Examples of this are the failure to service the debts of Bourbon France after the French Revolution , the failure by Denmark to service the bonds of the government set up by the German Confederation in Schleswig-Holstein in 1850 and the failure to service the debts of Tsarist Russia by the new Soviet government in 1917 after the October Revolution .
The risk of sovereign default can be measured using various indicators. A distinction is made between economic and market indicators. Economic indicators are the key figures that can be derived from a state budget and other aggregates, market indicators are current price and interest rate developments on stock exchanges / markets that show major deviations from the standard.
The basis for this are the state budget and gross domestic product . From them important economic indicators can be derived. A state must be able to generate so much liquid funds from its state budget that it can service debts from them at any time. An impending state insolvency is associated exclusively with impending insolvency , in which a state is no longer able to meet due payment obligations essentially on time. The gross domestic product as a measure of the economic strength of a state, in turn, indicates the amount of debt a state can even afford based on its economic strength. An economically important criterion for assessing the signs of an impending state bankruptcy is debt sustainability. Debt sustainability exists when a debtor is able to repay his debts and interest on a permanent basis without outside help due to his or her economic and financial situation. From the state budget, the state revenue and the primary balance , from the trade balance, the export revenues are compared with the national debt and the gross domestic product.
These so-called debt ratios are based on the following formulas:
With increasing government revenues or export revenues and a constant debt burden, it is becoming easier and easier to pay the national debt and vice versa. The structure of the debt is also decisive. This examines how high the proportion of foreign currency debt, foreign debt or short-term debt is. A high proportion of these types of debt tends to have an unfavorable effect. The key figures determined in this way are critical if they exceed certain limit values.
Limit values are the upper limit that one of the determined debt ratios may only temporarily and only slightly exceed. The stability criteria (TFEU) can be used as limit values , but also those determined by the IMF and World Bank. EU states that violate the stability criteria can expect financial sanctions. States that exceed the IMF and World Bank limits can count on help.
- EU stability criteria: there are only two, namely 60% (national debt / GDP) and 3% (net new debt / GDP).
- IMF / World Bank: 40% (EDT / GNI), 150% (EDT / XGS) and 15% (TDS / XGS).
- EDT: External Debts Total (total foreign debt )
- GDP: gross domestic product
- JNI: General National Income ( government revenue )
- XGS: Export of Goods and Services (export revenues)
- TDS: Total Debt Service (interest and repayment on loans)
- INT: debt interest
Debt sustainability can be measured using various debt ratios. It is just still there for a state, if
- a debt ratio below 200–250% (with net present value (NPV)) of government revenue,
- a debt service coverage ratio below 20-25% of government revenue,
- a ratio of debt (NPV) to government revenue of 280% and, in addition, high tax collection efforts (only for countries with a high level of world market integration: export revenue / GDP> 40%, tax revenue / GDP> 20%)
can be proven
and the limit from the ratio
- National debt / export earnings 150%
is not exceeded.
The limit values mentioned are intended for HIPC ( Heavily Indebted Poor Countries ) and MDRI ( Multilateral Debt Relief Initiative ) countries. IMF and World Bank apply these limit values as part of the debt relief initiatives (40% debt / GDP, 150% debt / export income, 15% debt service / export income). The limit values are not of a generally valid nature, but can be set too high in individual cases.
The World Bank uses four thresholds to determine the extent of a state's debt: EDT / BIP (30%), EDT / XGS (165%), TDS / XGS (18%) and INT / XGS (12%). A state was therefore considered to be heavily indebted if three of the four limit values were exceeded. At the end of 2001, Argentina's national debt reached 64.1% of GDP (limit value: 60%), and foreign debt, at 383% of export earnings, more than doubled the limit value (limit value: 150%). These are metrics that were alarming from a debt metrics perspective. In addition, the strong debt in foreign currency had a negative impact.
However, the above key figures represent global limit values and must be evaluated individually. However, there are no generally applicable and fixed limit values that represent a critical mark in individual cases and would signal a danger point if exceeded. If at least two of these limit values are exceeded not only temporarily and not only slightly, this can be interpreted as an indicator of an impending national bankruptcy.
The prices of government bonds , from which their current yield can be read, the price development of credit default swaps (with a government bond as an underlying ), credit spreads and ratings are considered sensitive market indicators and leading indicators .
- The price development of credit default swaps allows conclusions to be drawn about the risk of the underlying government bond. Their prices, the CDS spreads , are regularly higher than the credit spreads of a sovereign default risk-free reference bond. Excessive CDS spreads can indicate that there is an increased risk of default on government bonds.
- The credit spread is a risk measure for the creditworthiness of government bonds, so that the difference in yield (and thus the risk ) is shown for a risk-free government bond with identical conditions. The capital market tells how it assesses the probability of default of government bonds based on the credit spread. The higher the credit spread, the worse the country rating.
- Ratings are creditworthiness assessments of debtors ("issuer rating") and bonds ("issue rating") created by rating agencies . The ratings of states contain fundamental analytical data (national budget, gross national product) as well as the development of the other market indicators. The migration of a rating to “sub-investment grade” can be a signal that a debtor country is in acute danger of default.
Countries with a bad credit rating pay a significant premium on the capital markets compared to nations with the best credit rating. The interest rate difference (credit spread) is measured in basis points (100 basis points = 1%). For example, Argentina paid a spread of over 4,000 basis points shortly before default, which corresponds to a premium of 40 percentage points (e.g. AAA country 4% ⇒ Argentina 44% or AAA country 3% ⇒ Argentina 43% pa) .
The state can prevent national bankruptcy through solid budgetary policy. One way to avoid a national bankruptcy is to increase the current real budget balance. This can be done by:
- Increase in government revenue , in particular through
- Lower government spending , in particular through
- Postponing, discontinuing or reducing discretionary investment and subsidy measures
- Waiver of any planned nationalization projects
- Shifting the supply of infrastructure functions to the private sector, such as B. the construction and operation of motorways
- Reduction and postponement of current expenses, e.g. B. Maintenance and upkeep expenses for the state infrastructure, ongoing subsidies to social and insurance funds, regular subsidies. If, in addition to material costs, personnel and ancillary personnel costs are also to be reduced, certain groups are usually not or less included in cost-cutting programs. These groups include, in particular, the public servants and civil servants, for whom there are usually high regulations for the protection of existing property. Nevertheless, these high hurdles for public employees are also reduced in extreme situations, such as B. in Greece (see Greek sovereign debt crisis from 2010 ).
Monetization of the national debt
Before the introduction of paper money , it was not uncommon to make up for a lack of government funds by deteriorating coins . The national and international payment obligations at the time were each for a certain amount of precious metal minted in coins , mostly gold or silver. If the respective state had sufficient gold or silver reserves, full curant money could simply be minted. However, there was only an advantage if the coin footer , i.e. H. the precious metal content per coin was officially or secretly reduced. The Prussian King Friedrich II had secretly minted the so-called Ephraimites in order to fill his war chest. With the return to orderly currency relations in the 1820s, the Prussian state did not exchange the Ephraimites at the nominal value it had issued itself, but only at the actual precious metal value for new currency.
In the transition period to paper money, the state-issued banknotes contained a promise to pay out the face value of the paper money at any time upon presentation in Kurant coins. They therefore had the character of fungible bearer promissory notes with a monetary function . In the event of the threat of national bankruptcy, the state suspends the exchange promise in breach of the current currency constitution. The transition to actual national bankruptcy is fluid here. In 1813, for example, the Danish government introduced a currency reform ( Danish State Bankruptcy ), in which the state's liabilities, denominated in Rigsdaler in silver , were converted to the new currency Rigsbankdaler at a ratio of 6: 1 . A Rigsbankdaler also had only 5/8 of the fine silver content of the old Rigsdaler. Even these Rigsbankdaler were initially issued as paper money and could only be freely exchanged for minted silver coins again from the 1830s.
Capital movement restrictions
This includes all dirigistic measures of a government to control payment transactions, in particular foreign exchange restrictions , but also restrictions on trading or possession of precious metals. This results in limited or no convertibility of the currency concerned. The citizens are to be forced to invest their money in the national currency in order to prevent capital flight . Other goals of such measures are usually the stabilization of the exchange rate, the improvement of the balance of payments and the prevention of currency speculation.
In history, for example, paper money and token coins were suddenly no longer redeemed in full or at all in Kurant coins and kept in circulation at the compulsory rate. B. the French assignats (= paper money) from 1789. For this, creative, understandable reasons had to be used, which were occasionally underpinned with draconian penalties. It was like that B. During the French Revolution, ordinary citizens were forbidden to pay or trade with gold or silver money with a heavy penalty (six years put in iron). Rather, it should be delivered to the state in exchange for so-called assignats. Another example is the move away from the gold standard as a result of the global economic crisis.
States in need of money invented a variety of measures to borrow money without this being recognizable as borrowing. examples are
- Mefo change in the Third Reich,
- Only one-third coverage of the banknotes in gold at the time of the Goldmark , discontinuation of the obligation to exchange gold and abandonment of one-third coverage at the beginning of the First World War .
Such measures often lead to inflation, unless other measures such as goods receipt systems, state price freeze or the like have been prescribed, since ultimately the money supply increased in relation to the available amount of goods. Ultimately, however, this meant a build-up of inflation, which in its extreme training can also be described as postponed national bankruptcy.
- Sale of state property or rights (e.g. the match monopoly ).
The match monopoly had the character of an additional tax in favor of a large Swedish manufacturer of matches. In 1930 the latter had granted the German government a loan of 500 million Reichsmarks at preferential rates in exchange for the establishment of a monopoly in his favor. After the monopoly expired, the prices of the previous monopoly goods fell by about a third.
In addition to economics and economics, the term is also the subject of investigation in law and social science. International law and international monetary law also deal with the problems of state insolvency.
In Germany, InsO provides that insolvency proceedings against federal or state assets are inadmissible. According to the Federal Constitutional Court (BVerfG), the reason for the state's inability to insolvency is to be seen in the fact that "healthy state finances are the first prerequisite for an orderly development of all social and political life". The criminal offense of bankruptcy according to StGB is not applicable to state bankruptcy because it requires the opening of insolvency proceedings, which are excluded for the state according to § 12 (1) InsO.Paragraph 1, No. 1 of the
There is a worldwide lack of both independent supranational institutions and legal consequences when it comes to state bankruptcy. As the highest risk bearer , states are not in a legally free area, but there is still great uncertainty about the legal and economic consequences of a state bankruptcy. In connection with Greece, for example, there is talk of “controlled insolvency”, although there are no regulatory systems for its implementation. In comparison, insolvency proceedings for companies and individuals take place in accordance with national laws.
State bankruptcies particularly affect the creditors of the state as well as the economy and the citizens of the state itself as well as all countries that have economic relations (imports and / or exports) with the country.
The Argentina crisis in December 2001 exemplified the far-reaching effects of a state bankruptcy. President Rodriguez Saá had formally declared Argentina's insolvency on December 25, 2001, triggering a credit event .
The following consequences for future national crises can be derived from the economic consequences of this sovereign default:
- The creditors, especially those of government bonds, do not initially receive any interest on their bonds and, when they become due, also no repayment, or they are asked to give full or partial debt relief (“haircut”).
- If government bonds are no longer serviced, this affects not only foreign creditors, but also domestic ones. In addition to banks, funds and insurance companies, this also includes private investors whose assets are wholly or partially worthless. This exacerbates the crisis of the banks, which are threatened with bankruptcy . Insurance companies are at risk and so are life and pension insurances.
- In addition to the interest on loans, the state can no longer afford other expenses: salaries and pensions for government employees, social transfers, education, infrastructure, investments or security.
- Conditional aid programs run through the IMF, the World Bank, the Paris and London Club, which are intended to ensure the minimal maintenance of internal order in the country itself. Because in the country concerned, public life largely collapses, there is a run on the banks with subsequent capital flight.
- Hyperinflation sets in because the supply largely collapses due to extensive production standstill and falling imports. In some cases barter begins .
- Unemployment and, as a result, poverty rates are increasing progressively. This puts public safety at risk.
- Any ties between the national currency and reference currencies are being abandoned or temporarily suspended because more and more local currency has to be used for imports. However, this drastic devaluation effect can have positive consequences, with the help of which an economy can recover. Export goods are inexpensive and enable an improvement in the export situation, which in turn reduces unemployment and poverty.
- The more important an affected state is for the region or the global economy, the more likely it is that contagion effects will affect neighboring countries, international financial markets or the global economy .
Consequences for the creditors
One consequence of the national bankruptcy is that the creditors lose all or part of the money they have lent to the state, as well as the interest on it. Partial debt relief or debt rescheduling (for example the Brady Bonds of the 1980s) is often agreed as part of international negotiations (e.g. the London Debt Agreement 1953) . These agreements ensure the repayment of partial amounts with waiver of the remaining claims. In the context of the Argentina crisis , for example, the creditors waived up to 75% of their claims. Since lenders anticipate this risk , creditors are demanding higher interest rates from insecure borrowers, which partially covers their loss in advance.
In such waiver negotiations, different conditions are often agreed for different groups of creditors (e.g. domestic creditors vs. foreign creditors; claims in debtor currency vs. claims in foreign currency; claims from private versus state creditors). Since the domestic savers are mostly important creditors of the state, the main burden of national bankruptcy is borne by the individual private citizens, who have to accept a partial loss of their claims (and often also inflation).
The decision of the BVerfG enabled German creditors of Argentine government bonds to obtain an enforcement order against the Republic of Argentina. However, it is problematic to enforce such titles. The ruling is also of little help if debtor states fall into crisis in the future and this affects their government bonds. It is undisputed that the state of emergency can only suspend the payment obligations of a debtor state. They come to life again when the prerequisites of a state emergency no longer exist. State payment crises can be better managed if so-called collective renegotiation clauses (" Collective Action Clauses ") are included in the bond terms , which enable a majority rescheduling of debt and prevent the blockade of minorities unwilling to reschedule.
Consequences for the state
With the national bankruptcy the state gets rid of its financial liabilities to its various creditors. All things being equal, this leads to a relief of the state budget in terms of the amount of interest and repayments. On the other hand, there is usually a collapse of major government creditors who hold a substantial part of their liquidity in supposedly safe government securities (such as banks and large companies). The consequences are therefore mostly a total collapse of the economy, the consequences of which, with revenue shortfalls and expenditure requirements, can be more expensive for the state than the theoretical relief. In addition, a national bankruptcy is always associated with a long-term loss of image and trust: the state will not be able to take out any (or only very expensive) loans on the capital market for a certain period of time. That is why there is usually an interest in an orderly settlement not only on the part of the creditors, but also on the part of the state.
For debt regulation, federal states and confederations of states may have regulations that limit the sovereignty of over-indebted states during debt settlement . In the Holy Roman Empire , for example, the Reichshofrat could set up so-called debit commissions to settle the debts of overindebted imperial estates , which, as part of their work, restricted the sovereignty of the imperial estates concerned.
Consequences for the national economy
Consequences for the economy are typical
- a banking crisis as banks have to write large write-offs on their government loans;
- an economic crisis as domestic demand plummets and investors withdraw funds;
- a currency crisis as foreign investors avoid the affected currency.
This typically affects many citizens through high unemployment and the cancellation of state benefits.
State bankruptcies are by no means uncommon. The IMF inventoried a total of 257 sovereign defaults between 1824 and 2004. Konrad / Zschäpitz have listed a total of 250 state bankruptcies since 1800 and 90 bankruptcies from 73 states since 1980 alone, some states have therefore gone bankrupt several times. Chile alone has been insolvent seven times, Brazil six times and Argentina five times. Of the member states of today's Eurozone, Austria, Greece, Portugal and Spain have been insolvent at least once since 1824. In the state bankruptcies between 1998 and 2005 examined by the International Monetary Fund (IMF), creditors had to write off between 13% (Uruguay), 73% (Argentina) and 82% (Russia) of their claims.
The English economist Adam Smith spoke of national bankruptcy in his work The Prosperity of Nations in 1776 . According to Smith, Britain can only be saved from national bankruptcy and put on a sustainable growth path through a radical change in economic and colonial policy. He described the origins of national bankruptcy: "If national debt has reached an excessive level, there is ... hardly a single example that it has been paid honestly and in full".
Throughout history there has been a long series of national bankruptcies, near failures, and refusals to pay. "Every country in Latin America got into this situation at some point, several of the southern states of the USA before the civil war , Austria (five times), the Netherlands, Spain (seven times), Greece (twice), Portugal (four times), Serbia and Russia." 20th century Mexico (1914) and "1918 the rejection of the tsarist foreign obligations by the young Soviet power , after 1949 the unilateral cancellation of all debts to" imperialist "creditors by the People's Republic of China ."
In federal states , member states with their own financial sovereignty can suffer state bankruptcy independently of the state as a whole if there is no liability of the state as a whole or no functioning financial equalization. In the wake of the economic crisis of 1837, for example, the majority of the US states suspended their payments. Overall, the US state debt had risen from $ 13 million to $ 170 million between 1820 and 1837. After the US banks stopped their cash payments on May 10, 1837 , the ongoing conflict between the states over their rights vis-à-vis the Union intensified. In 1841, the Union was about $ 5 million in debt and the states over $ 200 million. After the Union failed to assume debt , the individual federal states concluded debt rescheduling agreements with their creditors from 1845 onwards .
|1345||England||In 1345 the English King Edward III refused . to settle his Hundred Years War debt to his Florentine bankers .|
|1425||China||During the Ming Dynasty , paper money inflation occurred in China, which resulted in national bankruptcy in 1425. The last state bankruptcies occurred in China in 1921 and 1939.|
|1557||Spain||Spain's King Philip II was forced three times during his reign to declare his creditors bankrupt. In 1557 the Welser trading house was particularly affected by bankruptcy.|
|1575||Spain||In the prehistory of the “ Spanish Fury ” (the sacking of Antwerp in 1576) this second Spanish national bankruptcy is discussed.|
|1596||Spain||On November 29, 1596, Philip II ordered the suspension of state payments.|
|1788||France||On the eve of the French Revolution, France was under King Louis XVI. De facto insolvent in 1788 at the latest. He had to use 2/3 of his income for debt servicing. The national bankruptcy of 1788 and the associated convocation of the Estates General by the King is one of the main reasons for the following French Revolution .|
|1805||France||In 1805, the Compagnie des Négociants réunis , a consortium of French merchants, brought the French state to the brink of bankruptcy through speculation with the Spanish silver reserves in Mexico.|
|1812||Kingdom of Westphalia||Between its founding in 1807 and its dissolution in 1813, the Kingdom of Westphalia issued several compulsory bonds, most of which were not paid for at all or only at a third of their value.|
|1837||United States||In the aftermath of the economic crisis of 1837 (during the downturn between 1837 and 1843), eight American states stopped paying and more than 100 banks went bankrupt.|
|1875||Ottoman Empire||In 1875, the Ottoman Empire had to declare its national bankruptcy because it could no longer service its foreign bonds placed in England and France in particular (see Administration de la Dette Publique Ottomane ).|
|1918||Soviet Union||In 1918 the Soviet government refused to service the debt of the Russian Empire . The outstanding Russian government bonds and bonds from Russian companies were mainly placed in France between 1888 and 1914 .|
|1923||Germany||In 1923, as a late aftermath of the First World War , Germany was bankrupt. For more on this hyperinflation in Germany, see → German Inflation 1914 to 1923 .|
|1933||Newfoundland||Newfoundland was insolvent in 1933 at the latest. It is one of the few examples in history of a state bankruptcy followed by a loss of state sovereignty. Newfoundland was a separate dominion in the British Empire from 1907 to 1934 . After the national bankruptcy, the country's self-government was withdrawn and the administration was transferred to a Crown Commission, in order to finally become a Canadian province after a referendum.|
|1945||Germany||After the Second World War , Germany was bankrupt because Hitler had financed the war with the banknote press and, due to the considerable destruction of the German economy, money had a much smaller range of goods than before the war. In 1948 a currency reform took place first in the western zone and then in the eastern zone .|
|1971||United States||On August 15, 1971, the American President Richard Nixon announced the immediate abolition of dollar convertibility to gold. H. the lifting of the US obligation to exchange dollars for a certain amount of gold at any time. This announcement, also known as the Nixon shock , actually meant the declaration of insolvency or unwillingness to pay, as the cancellation took place unilaterally and in breach of existing agreements ( Bretton Woods system ).|
|1998||Russia||On August 17, 1998, Russia announced the restructuring of interest and redemption payments on government bonds with a volume of USD 13.5 billion, which corresponds to a default of these bonds (see Russian crisis ). As a result, there were significant price changes on the capital markets, which led to the crisis surrounding the LTCM fund.|
|2002||Argentina||In 2001/2002 Argentina went bankrupt.|
|2008||Iceland||In 2008 Iceland nationalized the three largest banks as part of the financial crisis. Iceland then refused to service these banks' liabilities. For example, a loan from Glitnir Bank that had matured was not repaid, and foreign savers were not repaid. This effectively resulted in national bankruptcy in Iceland .|
|2010||Greece||The Greek financial crisis (or Greek crisis) is a budget and sovereign debt crisis in Greece that has occurred since 2010. The cause of the crisis was Greece's fiscal policy, which was not financially sustainable for several years. With the introduction of the euro in 2001, Greece is closely linked to the countries of the euro zone in many ways , so that since 2010 the EU and IMF have been forced to defend Greece's payment problems with liquidity and guarantees. The reforms with which Greece itself wanted to contribute to reducing its national debt are progressing more slowly than planned, so that it is still unclear to what extent Greece will need further funding to avert its national bankruptcy.
Because, after Greece, some other above-average indebted EU countries also got into refinancing problems, one speaks across the board of a euro crisis .
|2012||Belize||One of the last state bankruptcies occurred in Belize in August 2012 .|
|2014||Argentina||Since July 30, 2014, Argentina has again been in arrears on rescheduled bonds from the last national bankruptcy in 2001. Since the country does not comply with a legal ruling by a New York court on the disbursement of the plaintiff " Holdout creditors ", it is also allowed to reschedule the debt Do not service bonds, so a "technical default" has occurred. However, there is no national bankruptcy in the classic sense (over-indebtedness), as the country has sufficient assets and foreign exchange reserves (approx. USD 29 billion). The foreign debt ratio is also relatively low at around 45% (in relation to GDP). However, the economic framework conditions in Argentina (high inflation, recessive tendencies) have noticeably deteriorated in recent years. This technical default is likely to accelerate this development further.|
Examples of states:
|2015||Puerto Rico||The island, on the outskirts of the United States , could not repay a bond due on August 1, 2015, which the rating agency Moody’s rated as a default. Puerto Rico is bankrupt.|
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