It’s time we reconsidered the principle that states must always repay their sovereign debt

Is it true that states must always repay their sovereign debt – even after a major regime change – to maintain their future creditworthiness? Odette Lienau writes that this conventional wisdom on sovereign debt is overly simplistic and in some cases entirely wrong. She argues that the assumptions of political neutrality, creditor uniformity, and historical constancy, upon which this common narrative rests, do not stand up to closer inspection. This suggests that more flexibility exists in terms of our understanding of government debt and how the market determines creditworthiness.