Top Stories
Top Stories
Slideshows

The world’s biggest sovereign defaults

iStock | Getty Images

With Greece and Puerto Rico's debt-wrangling in the spotlight, CNBC takes a look at what happens when countries fail to repay their debts—a so-called sovereign default.

Greece already holds the crown for the world's biggest sovereign default to date, with a $261 billion default three years ago, according to data from Moody's Investors Service.

And there are other repeat offenders, such as Argentina, with one financial crisis setting up the next and sometimes impacting neighboring countries too.

However, some high-profile debt dramas didn't even make the rankings — Cyprus's default in 2013 came in at a comparatively meager $1.3 billion. Plus, Argentina's most recent default, in 2014, is not included because there is not yet a definitive figure for the sum involved.

Click ahead to see the 10 biggest sovereign defaults from across the world.

—By CNBC's Katy Barnato on July 7, 2015.


10. Ecuador
Rodrigo Buendia | Getty Images

When: December, 2008

Size of default: $3.2 billion

Sometimes countries are able to pay their debts, but simply choose not to. This was the case in 2008, when Ecuador's leftwing government opted not to honor payments due on 2012 and 2030 global bonds, declaring them "illegal" and "illegitimate."

According to Moody's the default occurred "in a situation of relative macroeconomic strength" for the Latin American country.

"The government's decision to default was based on ideological and political grounds and was not related to liquidity and solvency issues; the default thus represented a problem of 'willingness to pay' rather than 'capacity to pay,'" the ratings agency said.


9. Peru
Ernesto Benavides | AFP Photo | AFP | Getty Images

When: September, 2000

Size of default: $4.9 billion

Sovereign debt struggles have been something of a Latin American trademark, with four countries in the region making this list of biggest defaults.

Argentina and Peru shared a nemesis in the form of "vulture capitalist" Paul Singer in the 2000s. The founder and CEO of Elliott Management Corporation won cases against both for repayment of the full value of debts which he acquired cheaply when the countries were in financial crisis.

Peru defaulted in 2000 after opting against paying $80 million in interest on four "Brady" bonds—dollar-denominated debt issued by developing countries, usually in Latin America.

However, unlike the other countries listed, Peru "cured" its default within the 30-day grace period. It settled the dispute with Elliott with a multimillion-dollar payment, which freed it to make its interest payments on the Brady bonds.

8. Uruguay
Miguel Rojo | AFP | Getty Images

When: May, 2003

Size of default: $5.7 billion

Contagion from the Argentinian debt crisis of 2001 led to a currency crisis in neighboring Uruguay, which had enjoyed an "investment-grade" rating from Moody's between 1997 and 2002.

Uruguay's total debt escalated to around 100 percent of gross domestic product (GDP), or roughly $11 billion, meaning it didn't pay a significant amount of bonds due in 2003 and 2004.

To combat the problem, Uruguayan authorities launched a debt exchange in April 2003, aiming to lengthen the average maturity on bonds, with no principal reduction. The exchange was completed promptly (at the end of May), with high participation rates from investors.


7. Ecuador (again)
Paul Harris|AWL Images|Getty Images

When: August, 1999

Size of default: $6.6 billion

In 1999, Ecuador suspended payment on almost half of the interest due on its Brady bonds. However, with support from the U.S., the Andean country renegotiated its $1 billion of debt outstanding to the Paris Club—a group of creditor nations from around the world—and restructured over 98 percent of the debt into new bonds.


6. Jamaica
Anthony Foster/AFP/Getty Images

When: February, 2010

Size of default: $7.9 billion

The former British colony defaulted in 2010 when its debt-to-revenue ratio stood at around 400 percent. The debt exchange covered all of its marketable domestic debt, worth around 60 percent of GDP or 700 billion Jamaican dollars ($6 billion).

Jamaica continues to struggle with debt today, however, with the government dedicating around one-third of its revenues to making interest payments.


5. Jamaica (again)
Mladen Antonov/AFP/GettyImages

When: February, 2013

Size of default: $9.1 billion

Jamaica's 2013 default was its second in three years. Jamaican authorities announced an exchange in February affecting $91 billion in domestic bonds—around half of the government's outstanding debt at the end of 2012. Some 25 existing bonds were replaced with new ones, with maturities extended by three to five years and lower interest rate repayments.


4. Greece
Louisa Gouliamaki/AFP/Getty Images

When: December, 2012

Size of default: $42 billion

Greece defaulted to the tune of $261 billion in March 2012 (see later slide), before making a debt buyback at distressed levels in December of the same year. Moody's classified this as a second, $42 billion default.

The December debt buyback reduced Greece's debt stock by 5.8 percent and the debt-to-GDP ratio by 10 percentage points, according to Moody's.

Greece's debt burden remains very large and last month it failed to pay a 1.5 billion euro ($1.8 billion) payment due to the International Monetary Fund (IMF)—the first country to do since Zimbabwe in 2001. However, this missed payment does not constitute a technical default, with the Washington-based body instead terming Greece as "in arrears."

3. Russia
Maxim Marmur | Hulton Archive | Getty Images

When: August, 1998

Size of default: $73 billion

1998 was a bad year for sovereign defaults, with Russia, Pakistan, Ukraine and Venezuela all defaulting. This was on the back of a cooling global economy and unfavorable market sentiment after the Asian financial crisis in 1997—although, interestingly, no country directly affected by the crisis actually defaulted on its government bonds.

Russia's default was the largest ever at the time, with the country also suffering currency, banking and fiscal troubles as a result of weak oil and metal prices—which still challenge the country today.

2. Argentina
Daniel Garcia/AFP/Getty Image

When: November, 2001

Size of default: $82 billion

The Latin America country defaulted on its foreign debt at the end of 2001, before completing several exchanges to cover various defaulted bonds. Investors took haircuts as high as 65 percent, according to some estimates.

This came after the government accrued large amounts of debt and the IMF refused to make an advanced payment to Argentina on a previously-agreed loan.

In addition, Argentina's pegging of its currency to the U.S. dollar in 1989 eventually led to a run on the banks, with Argentinians rushing to convert pesos into dollars on a one-to-one basis.


1. Greece (again)
Getty Images

When: March, 2012

Size of default: $261 billion

In its fifth year of recession, Greece's default was the biggest ever at $261 billion, despite hefty financial assistance from both the European Union and the IMF.

A debt exchange was instigated that saw private holders of Greek government bonds take losses in excess of 70 percent, according to Moody's. Each 1,000 euros ($1,103) of the original value of the bonds was exchanged for: 315 euros of new bonds issued by the Greek government, 150 euros of payment notes issued by the European Financial Stability Facility and 315 euros of GDP-linked securities.

Greece's financial straits remain dire after Greeks voted against a creditor-proposed bailout this weekend in an unexpected referendum. It is unclear now if Greece can secure much-needed aid or even remain in the euro zone.