Default
in sentence
1154 examples of Default in a sentence
After all, when the euro was born, global financial markets were in turmoil, owing to the Asian crisis of 1997 and the Russian
default
of 1998.
But mass atrocity crimes did happen in Sri Lanka, there was moral
default
all around, and if we do not learn from this past, we will indeed be condemned to repeat it.
The crises in Ireland and Greece called into question the euro’s viability and raised the prospect of a debt
default.
It speaks to ten-year
default
probabilities of less than one in 500,000; notes that even if the analysis is off by an order of magnitude, any risks to government are very modest; and appeals to the regulatory system in place at the time to minimize that their model missed risks.
Since coming to power in January, the Greek government, led by Prime Minister Alexis Tsipras’s Syriza party, has believed that the threat of
default
– and thus of a financial crisis that might break up the euro – provides negotiating leverage to offset Greece’s lack of economic and political power.
Tsipras and Varoufakis assume that a
default
would force Europe to choose between just two alternatives: expel Greece from the eurozone or offer it unconditional debt relief.
But the European authorities have a third option in the event of a Greek
default.
The Tsipras-Varoufakis strategy assumed that Greece could credibly threaten to default, because the government, if forced to follow through, would still have more than enough money to pay for wages, pensions, and public services.
In that case, the threat of
default
is no longer credible.
With the primary surplus gone, a
default
would no longer permit Tsipras to fulfill Syriza’s campaign promises; on the contrary, it would imply even bigger cutbacks in wages, pensions, and public spending than the “troika” – the European Commission, the European Central Bank, and the IMF – is now demanding.
For the EU authorities, by contrast, a Greek
default
would now be much less problematic than previously assumed.
They no longer need to deter a
default
by threatening Greece with expulsion from the euro.
The Cyprus experience suggests that, with the credibility of the government’s
default
threat in tatters, the EU is likely to force Greece to stay in the euro and put it through an American-style municipal bankruptcy, like that of Detroit.
That, in turn, will force a
default
against Greek citizens, as well as foreign creditors, because the government will be unable to honor the euro value of insured deposits in Greek banks.
So a Greek
default
within the euro, far from allowing Syriza to honor its election promises, would inflict even greater austerity on Greek voters than they endured under the troika program.
A debtor’s strongest negotiating asset is always that creditors cannot contemplate default, because
default
would bring down the entire financial system.
But market discipline can be established only if
default
is a true possibility.
This is why it is crucial to create a mechanism to contain the cost – and thus minimize the unavoidable disruptions – resulting from a
default.
The EMF (or rather ESF, as some have dubbed it, for European Stability Fund) could manage an orderly
default
of an EMU member country that fails to comply with the conditions attached to an adjustment program.
To safeguard against the systemic effects of a default, the EMF could offer holders of the defaulting country’s debt an exchange of this debt against claims on the EMF.
This would be a key measure to limit the disruption from a
default.
A
default
creates ripple effects throughout the financial system, because all debt instruments of a defaulting country become, at least upon impact, worthless and illiquid.
Ideally, one should base the contributions on market indicators of
default
risk.
These two simple elements – orderly
default
and a financing mechanism – could resolve the current crisis within the euro zone: by creating a European Monetary Fund along these lines, the euro area would acquire an institution that could support member countries in difficulties, but that would also ensure that market discipline really worked.
Unfortunately, it looks as though the UK is now headed for the second option – a “hard” Brexit – by
default.
My own sarcastic reaction was to think, “Oh, now the IMF thinks that some of the core eurozone countries are a
default
risk.”
At the same time, a technical
default
by Greece was avoided, and the country implemented a successful – if coercive – restructuring of its public debt.
Elections in Greece – where the recession is turning into a depression – may give 40-50% of the popular vote to parties that favor immediate
default
and exit from the eurozone.
This approach has several advantages: by leaving the face value of the debt unaltered, EU officials could argue that restructuring Greece’s debt did not amount to a default, thereby limiting contagion.
But markets are already assigning a high probability to a Greek
default.
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