debtIs it simply due to some sort of convention, and that due to such convention, all parties understand that it is “okay” for another country to enforce debt collection?
After all - should the citizens of one country be held responsible for imbalances in debt made by their ancestors?
From a question comment…
is that loans are made to the government and not the people running it or the citizens of that country, so it’s the same entity even 50 years later, even if it’s being run by totally different people or all the original citizens are dead
I’m wondering why countries are so keen on enforcing that rule. Especially given that for the indebted country, is often in its self-interest to find arguments to break that rule
It is very beneficial for a government to be able to borrow against its future income - since projects such as infrastructure and education cost revenue now, and bear rewards in the future. This can be an extremely valuable option for a government, consider:
Given this, governments want to maintain the ability to raise money by borrowing. Even if they have plenty of money to spend right now, it is a valuable option to be able to borrow in order to invest in the future - so the government wants to keep this option open.
If the government stopped paying back old debt, then why should anyone who might lend it money now, or in the future, trust that it will repay back any new debt?
Without this trust, the advantages of being able to borrow are not available: motivating paying old debt in order to ensure a continued ability to borrow.
Argentina, for example, has been banned from international capital markets after defaulting in 2002.
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