Tuesday, October 18, 2011

A Greek Tragedy

As the Greek economy totters on the brink of a sovereign default, I found out that it is no new experience for the Greeks. The very first sovereign default in the recorded human history occurred in Greece in 377 BC. In that year 10 out of 13 city clusters in Greece defaulted on loans they had taken from the famous temple of Delos, the mythical birthplace of Apollo. European banks are today unhappy that now the authorities are asking them to accept more losses than 21% they had previously agreed on Greek sovereign debt. But 2400 years ago, the temple – one of the richest in the Hellenic world – had to write off 90 per cent of the loan amount! Lessons are pretty clear from that first default – debt defaults often happen in groups (so, watch out for Spain and Italy and Portugal and Ireland....) and losses turn out to be more than what appears at the first glance (red signals for M/s Sarkozy and Merkel)
Temple of Delos
In modern times, Greece as a nation state has defaulted only 5 times – 1826, 1843, 1860, 1894 and 1932. Some of these defaults lasted quite long, for instance the 1932 default shut Greece out of international market till the early sixties. Roughly Greece has been under default for 90 years or 50% of the time since its independence in the modern era. Quite enviable record – we must concede.
As it seems, history sometimes does repeat itself – at least the Greek tragedies!!!

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