Default in Today’s Advanced Economies: Unnecessary, Undesirable, and Unlikely, Carlo Cottarelli, Lorenzo Forni, Jan Gottschalk, and Paolo Mauro, IMF Staff Position Note, September 1, 2010, SPN/10/12
“The state of the public finances has worsened substantially in the main advanced economies as a result of the 200809 global financial and economic crisis. For some peripheral European countries, market participants and some commentators occasionally seem to believe that default (here intended as some form of debt restructuring) will sooner or later inevitably occur. Concerns about fiscal solvency in those countries have been reflected in financial market pressures, large default risk premiums on sovereign bonds, and downgrades by rating agencies. At the time of writing (late August 2010), credit default swap spreads are about 900 basis points in Greece and 300 basis points in Ireland and Portugal. In general, volatility remains high and every auction of government paperespecially in Europe, including in the largest countriesis closely monitored to discern possible triggers of abrupt market reactions.”
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