system
Given the following post, respond as if you're commenting on Reddit:
human
What happens when a government goes bankrupt?

In the talks about the bailouts for Greece the goal seems to be to prevent the Greek Government from going bankrupt. But what happens if they would? I posted some numbered questions to better display my confusion.

1: Do the countries assets get seized by the creditors?

2: Does the country descent to anargy?

3: Do they get kicked out of the EU?

4: What would the implications be for the stability of the Euro?


Thanks in advance folks!
gpt
1. Government debt isn't backed by any asset, it's not like a mortgage backed with a house. Even if it were you'd need an army (most likely) to go get it.

For the rest of the questions countries can't go into bankruptcy like an individual, Governments default on their loans, not declare bankruptcy. What the bailouts are trying to do is to prevent a Greek default, by giving the Greeks enough money to run a government and make payments on their government debt.

If the Government fails to payout on a loan this devalues all the greek loans and any new issue of debt will have to offer a high interest rate.  This high interest rate is problematic because then the government budget is consumed by something that doesn't benefit the economy and then this would lower GDP.

Because they are part of the Eurozone they can't just print more money and risk hyperinflation.

2: Note the Greece has already had a technical default on one of their loans and they haven't had complete anarchy.

3: The president of the Euro central bank stated that he will do everything to keep  Greece in the euro zone.

4: If there were larger scale defaults by Greece, the Euro plunges and is more unstable. If Greece is removed from the euro zone the euro rises.

Hope that helps.