If a country goes bankrupt...?

Odaise Gaelach

I do apologise if this is the wrong place for this thread, but it's a question that's been bugging me for the past while and I'm not too sure where really to find an answer to it.

My question is basically this: what happens to a country if it goes bankrupt? If Greece or Italy goes bankrupt, then, umm, what happens after that? What does the country do then?

irish_goat

The country would default on their debt, issue new currency and start rebuilding.

The problems they would face would be loss of reputation, capital flow out of the country as foreign investors shift their assets out, and domestic citizens would buy foreign currency in order to preserve it's value. A banking crisis may emerge and bring with it all the troubles we've been facing.

Of course, the country wouldn't come to a stand still. People would still go to work and some investment would still come in so it would be a matter of knuckling down and getting through what would be a period of low economic activity and high unemployment.

SBWife

A recent enough example which should give you some idea of the consequences is Argentina they defaulted in 2002.