A Country Default: What Does It Mean?

The Protiviti View

Eyes have been on Greece and its debt crisis for a long time. The downward spiral of the Greek economy began some 35 years ago with fiscal policies that expanded the country’s debt-to-GDP ratio four-fold over the ensuing decade and into the early 1990s. After stabilizing its economy and holding the debt-to-GDP ratio relatively constant until the advent of the Great Recession, Greece has experienced a 50 percent increase in the ratio to its present unsustainable level. Structural weaknesses in the economy, the recent default on debt obligations, and lost confidence among lenders regarding Greece’s ability to take responsibility for its fiscal issues have led to the present crossroads.

After the initial 2010 bailout and subsequent bailout extensions, coupled with extensive debt restructuring involving principle reductions, extended maturities and lower rates, the present crisis has been marked by weeks of debate and posturing between Greece and the eurozone in which…

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