Countries that have defaulted since 1998
| Default date | Country | Total defaulted debt ($ millions) |
| Jul-98 | Venezuela | 270 |
| Aug-98 | Russia | 72,709 |
| Sep-98 | Ukraine | 1,271 |
| Jul-99 | Pakistan | 1,627 |
| Aug-99 | Ecuador | 6,604 |
| Jan-00 | Ukraine | 1,064 |
| Sep-00 | Peru | 4,870 |
| Nov-01 | Argentina | 82,268 |
| Jun-02 | Moldova | 145 |
| May-03 | Uruguay | 5,744 |
| Apr-05 | Dominican Republic | 1,622 |
| Dec-06 | Belize | 242 |
| Dec-08 | Ecuador | 3,210 |
Source: Moody's
Nigel Sillis, director of fixed income and currency research at Barings, believes it is difficult to use these examples from the past as a barometer of what could happen to Greece, pointing to the differing fortunes of Russia and Argentina since their respective defaults in 1998 and 2001.
"There is no template for how a defaulted country rehabilitates itself into the global financial community and thus regains the ability to issue external debt. Argentina even now cannot sensibly raise external debt yet Russia (and more recently, the near-defaulted Iceland) have been able to," he said.
"Investors tend to look at what has changed rather than what has been, so a re-appraisal of the country’s balance of payments position, competitiveness, indebtedness and debt sustainability will feature heavily."
"Also, the progress of structural reforms and political changes that may have taken place will be relevant too. It is always more constructive to look at the improvements and changes that a country has made post-default than to dwell on the original causes of that default."
"Quite simply, Russia achieved these structural changes much more rapidly and meaningfully than Argentina was able to in the same time scale."
Nick Gartside, international CIO of fixed income at JP Morgan, believes that what sets Greece apart from these previous events is its membership of the euro. "Plenty of countries have defaulted in the past, but no-one has defaulted while they have been part of a currency area."
"Defaults are often associated with currency devaluations, but because Greece is not in charge of its currency, this will make the adjustment mechanism very difficult."
Sillis agrees: "Defaulting, yet staying in the euro, will probably prolong the recovery process and thus Greece will be more reliant on official funding relative to private markets during this period."
"Conversely, a euro exit gives the Greeks more policy tools. Whether they can use them wisely remains to be seen. A free floating yet heavily devalued new drachma provides the opportunity for Greece to regain international competitiveness quite rapidly."
"This brings with it the possibility that domestic private sector consumption and activity among exporting industries can replace the lost activity within the economy that is removed by public sector fiscal contraction, which must happen in any event."
There are some similarities between Greece and Argentina in 2002. Although the South American country had its own currency, the peso, this had been pegged to the US dollar in 1989, and prevented the government from devaluing it during a recession. Argentina eventually defaulted on $82.3bn and debtors took haircuts of approximately 70 per cent.
John Greenwood, chief economist at Invesco, believes Greece’s situation is worse than this, saying favourable tailwinds that may not be available now meant that real GDP growth returned within two years and "exports never missed a beat".
"Also," he added, "Greek government expenditure (near 50 per cent of GDP) is twice as high as Argentina’s was, and the fiscal debt and deficits are far larger at this stage of the cycle. So it would not be an easy ride to recovery."
The real question is what consequence a default would have on the rest of the eurozone, with the major fear being that it would have a domino effect on other peripheral countries. Although Argentina and Russia’s defaults coincided with turmoil in world markets, Gartside believes this is inconclusive, saying: "It was a chicken and egg situation – it is impossible to say whether these defaults caused the volatility or if they were an effect."
Ominously, Argentina’s crisis was blamed when its neighbour Uruguay defaulted on $5.7bn of debt in 2003.