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Comment by DeepDuh | Hacker News Reader

Why is insolvency not an option for a country? It was in Sweden, which is doing fine now, and in Argentina more recently. Oh look, there's a whole lot more of them[1]. It only isn't an option for a member state of the EU. I sure don't see how Germany's strategy of starving those already struggling economies to death is going to work out.

[1] http://en.wikipedia.org/wiki/Sovereign_default#List_of_sover...

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For a country whose sole gdp generator is the banking sector, with that amount of foreign holdings it would be fatal. I'd only imagine how their relationship with Russia would be if Cyprus null'ed their holdings.

I may be exaggerating, but think of it as Switzerland losing it's bank sector. How would you begin to build up a new economy which, as of yet, biggest sector is banking, for instance. Think of the large population that would be instantly out of work.

At least, that's my guess at why an insolvency wouldn't be the best option for Cyprus.

Not that I don't agree that Switzerland loosing its finance industry would be a big blow for the country, but let's get some perspective: Banking is less than half the size of Switzerland's manufacturing industry in terms of income - in terms of workforce it's more like a third to a quarter. In international comparison, Switzerland's service industry isn't excessively large. I'd argue the country's economy would somehow survive it.

Source: http://en.wikipedia.org/wiki/Economy_of_Switzerland#Internat...

Sweden isn't in your list. In fact the last "rich" country was Germany in 48.

Btw, defaulting was an absolute disaster for Argentina

> Sweden (1812)

I would wager the guess that the world economy in 2013 is slightly incomparable to that in 1812.

I agree.

Could you expand on why do you think it was a disaster? Argentina was pretty screwed up, I'm not sure it got any worse than it already was.

This article describes things well, especially the last paragraph:

http://www.economist.com/node/21533453

Hm, while the economist's article points out how messy the process became, it doesn't makes an evaluation of how the default actually affected the argentinian economy.

I think that Greece and Argentina will make a good examples for comparisons of different approaches, when both recover economically (if they do recover, that is).

Ok sorry, I was wrong about Sweden - I thought the nation defaulted in the 90ies, but it was in fact 'only' a big chunk of their financial industry[1]. It seems that they came very close though, and the way they resolved it doesn't appear to be by tight economic grip either - the state poured 4% of their GDP into the system. However - and that's an important point that apparently went forgotten in the last US crisis - they also took the chance to regulate the financial industry more tightly, in order to avoid repeating the same mistakes.

[1]http://www.nytimes.com/2008/09/28/opinion/28iht-edbildt.1.16...

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