- What is the Federal Inheritance Tax? About.com, February 15, 2017.
3. Sovereign default, as a rule, is nasty business. It ripples throughout the world’s financial system, rattling investors and sparking huge sell-offs.
That is why the investing world is so focused on Greece, which is teetering on the edge of default. On Tuesday, markets tanked on worries that enough holders of Greek debt might not agree to the restructuring deal that had been negotiated. The deadline is Wednesday. Some analysts warn that such a default would trigger another financial crisis on the order of the 2008 meltdown after the failure of Lehman Brothers, perhaps worse.
By Wednesday, news out of Greece was a little more reassuring. At least two-thirds of Greece’s debt-holders are likely to accept the restructuring, which would trigger collective-action clauses that would force all the bond-holders to accept the deal. If 90 percent of the bond-holders take the deal, then it wouldn’t trigger a default, technically speaking.
But make no mistake: Greece is defaulting, even if it’s dubbed “voluntary”. The banks and other holders of its debt will get back only a fraction of what they invested. This is how nations work off their excess debt: Everyone from taxpayers to bond-holders takes a hit. It’s a process that Portugal, Japan, and other nations will have to go through to bring their debt back down to a manageable level.
Greece is an example for other nations of what it’s like to go through the economic wringer of default. It isn’t pretty.
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