Dr. Julien Mercille:

The literature on sovereign debt default is pretty extensive. The consensus is that for a country that defaults on sovereign debt, there are negative impacts in the short term, although not nearly as many as people tell us. However, the same does not apply in all cases. There is no magic rule. I gave the example earlier of Argentina, which did default. According to the literature, while the initial impact of that was negative, it was followed by good growth. Does this mean Ireland should have defaulted? Default is a broad term. One can default a little or completely. Again, Ireland is different from other countries. The point I was making is that if there is good evidence that the consequences of default would not be that bad, then the idea should at least be up for debate. It does not mean that default should be called for all over the place, rather it means that it should be considered.