Quote: Originally Posted by Cliffy
Did not Brazil and New Zealand default a while back and now their economies are doing fine? Seems to me the only losers will be the wankers.... er, bankers, and they deserve a swift one to the nuts.
New Zealand did not default and neither did Brazil. What happened in the case of Brazil was that the country suspended paying the interest on its loans and paid only the principle. At the time Brazil was caught by the sudden increase in interest rates due to the oil crisis of the 1970s. It was also hit by a slowdown in the world economy that struck hard at its resource based economy.
Originally Brazil had borrowed heavily during the 1960s and early 1970s with the idea of modernizing the country through the creation of modern infrastructure, the building of the Itaipu Dam being one example of many projects. it was hoped that by modernizing the country and developing its resources the loans would be easily paid off, but the downturn of the world economy and the increase in interest rates brought an end to that dream. Interest rates of 18% and higher left it crippled as the yearly interest alone was greater than Brazil's total GNP. As a result it continued to pay its debts but suspended interest rates. This continued until the 1990s when the return of interest rates to single digit number enabled Brazil to meet its international obligations.
Greece is a special case in that unlike Brazil the country has made little effort to develop a modern economy. Instead Greek politicians from both the left and the right chose to buy votes by heaping social benefits on their citizens and keeping taxes low. It is estimated that very few Greek wage earners actually pay the taxes they are supposed to. All of this has been subsidized by heavy borrowing and generous handouts by the rest of the EU. Such a system, of course, was eventually doomed to fail, and now it has.