Conference Paper

After the Second World War in connection with the potential for a national Euro sovereign debt crisis and sovereign debt default, we identify potential and positive consequences of such sovereign debt crises and sovereign debt defaults. This history reveals that four principle consequences have resulted from prior sovereign debt crises and defaults. These are generally seen to be: first, lost national reputation and reduced national borrowing capacity; second, the exclusion of some national companies from trading in certain markets; third, the impact on the domestic economy relating in particular to the cost of imports; and lastly, the impact on political activity and socio-economic policy. Reviewing the consequences of sovereign debt crisis and default post 1980, this paper considers the consequences of the current Euro-zone sovereign debt crisis, the potential for default and its likely short and long-term significance, as well as the potential for unexpected consequences. The paper considers the likely magnitude of the output losses and the human costs that will inevitably follow on the current Euro-zone crisis. The Euro-zone has unique peculiarity because it is an economy within the European Union economy so the possibility of devaluation within the zone does not exist. The paper finds that there is potential for both positive and negative impacts on the citizens of Europe.