Default and Repudiation
The first chapter details the nature of sovereign debts. The sovereign nature of the issuer has an enormous impact in terms of risk. At the very least, one may argue that sovereign bonds have a split personality in terms of risk. Indeed, debt issued by a government can be considered as either the safest financial asset or one of the riskiest. This chapter details the incentives governments have to repay their debts. It further shows the difference between default and repudiation. When states default they declare themselves unable to repay their debts. In the case of repudiation the legality of the debts is questioned. The difference is especially relevant in the Russian case as the Soviets decided to repudiate the Tsarist debts to mark a clear break with the previous regime. The chapter ends by detailing how the nature of lenders may affect negotiations and reimbursement.
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