Bankruptcy is a hot topic lately, both at the personal and national level. The recession, massive national debt, and a global financial crisis have some folks saying that a bankrupt United States is not outside the realm of possibility. It might seem impossible that the world’s wealthiest nations could face financial collapse, but it’s happened before.
1. Argentina
In 2001 Argentina saw a currency collapse and a run on banks. The Argentinian president, Fernando de la Rúa, froze the country’s assets; private citizens were limited to withdrawing a couple hundred dollars a week from their personal bank accounts. Eventually de la Rúa fled an enraged mob by helicopter, and the country defaulted on $145 billion in foreign debts.
2. Iceland
Iceland’s national currency, the krona, became essentially worthless in 2008. As a country heavily dependent on imported goods, Iceland’s inability to pay its bills quickly led to an international crisis. Great Britain threatened to sue to recoup money owed. Iceland’s three major commercial banks collapsed, and the country had to turn to the International Moneta
ry Fund for loans to keep the government afloat. A criminal investigation of the banks’ questionable financial practices prior to the collapse is ongoing.
3. Germany
Germany has been all but bankrupt twice in modern times. After World War I, the Treaty of Versailles imposed massive reparations payments on the country. Rampant inflation and currency speculation also contributed to the near-destruction of Germany’s economy; personal savings and investments were wiped out. When Hitler came to power in 1933, he had the National Socialist Party issue its own money, and a national credit program plus a series of public works projects all helped put the country back in the black. Unfortunately, by the end of World War II most of Germany’s manufacturing and production capabilities were destroyed and the country again faced enormous war reparations.
4. Russia
Massive international debt and declining national productivity contributed to Russia’s “ruble crisis” in 1998. The Russian stock market lost over 75 percent of its value between January and August; inflation soared over 80 percent, banks folded, and food prices more than doubled. Images from this time call up iconic pictures of the USSR two decades before, with empty grocery shelves and people lined up for a chance of employment or food.
5. Ecuador
Ecuador has been bankrupt several times in its relatively short political history. In late 2008 Ecuadorean president Rafael Correa stopped payments on foreign bonds for the second time in a decade. Despite Ecuador’s notorious history for defaulting, President Correa stressed his government would not sacrifice spending on health and education in order to pay the debts. This marked the sixth time since 1830 that Ecuador has defaulted on international debts since 1830.
6. France
France has a long history of bankruptcy—the country was insolvent seven times between 1500 and 1800. Along with England, France was one of the world’s superpowers during the Renaissance, but its crippling debt contributed to revolution and the loss of its status as the economic powerhouse of continental Europe. Extravagant spending by France’s royal family, support for foreign wars, and inflated interest rates led to discontent among the French along with economic woes. In 1789, on the eve of the French Revolution, the country was still paying debts incurred more than a hundred years before by King Louis XIV.
7. Spain
Spain became the first sovereign nation to declare bankruptcy in 1557, when King Philip II defaulted on a series of loans, and then continued to borrow and sink his country deeper into debt. He defaulted three more times in 1560, 1575, and 1596. When Philip died in 1598, he left a country that should have been wealthy with goods and silver from the West Indies, but instead was penniless and massively in debt.
