Sovereign debt crisis are actually pretty common so there’s nothing particularly abnormal about the current situation in Europe, according to Rabobank.
There research shows that sovereign defaults go all the way back to the fourth century B.C. It’s only been recently that everyone has forgotten and dismissed the threat of sovereign default.
In fact, if anyone would speak about it a few years ago, their economic understanding, and even possibly their sanity, would be questioned by all. Sovereign debt crisis was a thing of the past, or so the argument went. And if it did occur, it would most probably be in a ‘third world’ country. The simple reason was that industrialised countries had ‘graduated’ from periodic bouts of government insolvency given that they did not opt for a default since the 1960s.
The bank’s exhibit, a chart from the economists Reinhart and Rogoff, showing sovereign default is in no way abnormal. Notable, the absence of “advanced economy” default since the 1960s. The eurozone crisis could be about to end that.
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