Even if they do not resort to outright default, they can always achieve partial default through currency depreciation.
They will default, their currency will lose value, and high inflation will result, causing higher unemployment and a further erosion of their economy.
If Romania were to default, the currency could collapse, imports would plummet, growth would slump even faster, and an already impoverished people would see their standard of living dive still further.
Late Wednesday afternoon in Europe, Fitch Ratings said it had cut Iceland's long-term sovereign currency issuer default ratings to "BBB-, " from "A, " putting them firmly in "junk" territory.
The economy took a real battering after the spectacular collapse of the currency and the debt default at the end of 2001.
The danger is that Pakistan may have to endure the greater evil of fuel shortages, currency controls and even default before it accepts the lesser evil of stiffer taxes, higher electricity bills and the IMF.
He inherited chaos: the world's biggest debt default, the collapse of a currency board which had pegged the peso at par to the dollar for a decade, an unremitting recession that began way back in mid-1998, a freeze on bank savings and an angry populace.
Greece leaving the eurozone and adopting its own currency would be associated with default in its government debt, a collapse of the Greek banking system, and would probably tip the Greek economy into depression.
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If anything, growth should cause yields to fall due to a stronger currency and a lower risk of default.
Greece would default on its debt and adopt its own currency with its government spending and revenue roughly in line.
The convergence in yields reflects mainly the removal of exchange-rate risk since the creation of the single currency, but that still leaves default risk.
Obama and the Republicans twist themselves into pretzels protecting private corporate bonds from default by commandeering private capital and debauching the currency through the Fed to make multi-trillion-dollar bailouts of financial institutions.
Cyprus, the third smallest economy in the Euro zone (the term used to refer to the 17 countries which use the Euro as their currency), was on the brink of default.
There are two great examples in history of governments that got out of huge debt commitments without either defaulting or devaluing the currency, which is essentially another form of default.
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Quite apart from the huge technical problems of reintroducing a national currency, quitting the euro would surely entail default on euro-denominated debts, and could also put a country's membership of the European Union at risk.
In the currency market, the prospect of a potential American default also remained the main consideration.
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With Greece threatening to collapse, as Finance Minister Evangelos Venizelos has made clear, European banks, particularly in France, have begun stockpiling dollars, putting upward pressure on the currency. (Read Roubini: Greece Should Default, Leave The Euro And Reinstate The Drachma).
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Also purchase Renminbi-denominated assets as China, in its attempt to position itself as a global reserve currency, will likely lend support to any company that risks default.
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Ratings agency Fitch cut Greece's long-term credit rating from B- to CCC Thursday, only one notch above default level, reflecting worries over its ability to remain in the euro currency zone.
The reason the US could never be forced to default is that every single bit of the debt is owed in the currency that we and only we can issue: dollars.
The stated intention of this policy is to introduce more inflation as a means to potentially stimulate economic activity, but it also provides a means to pay back the large amassed debts with less valuable paper currency without having to deal with the short-term pain of actual default.
They have yet to fix the instability of a currency union built on an incompatible triad: no bail-out, no default and no exit.
The view from Brussels is that any default would spread to other countries and that it would undermine the credibility of the single currency and so the European project.
The necessary steps would also involve full "mutualisation" of eurozone sovereign debt, the pooling of sovereign liabilities, which would permit the European Central Bank to be the lender of last resort to the currency union - and give the eurozone the kind of protection against the risk of default that the UK and the US have.
If a messy default is forced upon a euro-zone country, it might be tempted to reinvent its own currency.
The market would likely take a Greek default and subsequent exit as a sign that anything is possible in Western Europe, including further erosion of the currency union itself.
Even if inflation remained moderate, many firms as well as the government would default on loans, since 90% of government debts and 80% of private-sector debts are in foreign currency.
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