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Economics

The Political Economy of Sovereign Debt Defaults

Quick fact

In 2015, Greece’s government faced a choice between default and continued austerity—and ended up defaulting while the prime minister negotiated a new bailout, showing that domestic politics often drive default decisions.

Why this is interesting

When a country stops paying its debts, it isn’t just about money—it’s a political earthquake that can topple governments. Why do some leaders default while others endure austerity?