sovereign default

searcher123

Senior Member
Farsi/Persian/فارسي
Greetings,
What is the meaning of "sovereign default" at the following example, please? The UK itself or UK's monetary unit?

  • The problems in the Eurozone and the USA have been sufficiently well documented not to need recounting here. But, since exports are the 'escape route' from the domestic spending constraints, the impact on the UK could undermine UK growth and the Chancellor's fiscal plans. Not only are the prospects in the UK's key markets weakening, but the UK has some commitment to the rescue packages, both directly and indirectly (through membership of the IMF), which could add further strain to public finances. The threat of a sovereign default in the Eurozone is also a huge risk to the banking system, which feeds back to growth and confidence right across the EU. -source: HSBC Bank

Regards
 
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  • Egmont

    Senior Member
    English - U.S.
    The sentence discusses default in the Eurozone, which uses the Euro. It cannot possibly refer to British currency. "Sovereign" is used in the sense of "about an entire country or its affairs," not as the old term for the British pound.
     

    searcher123

    Senior Member
    Farsi/Persian/فارسي
    Thanks to reply.
    So we can change it to: The threat of the UK that is an important member of the Eurozone is also a huge risk to the banking system, which feeds back to growth and confidence right across the EU.

    Did I took it right?
     

    Egmont

    Senior Member
    English - U.S.
    No. The word "sovereign" here has nothing to do with the UK.

    The Eurozone, as its name implies, is the part of Europe that uses the Euro as its currency. The UK does not use the Euro; it uses the pound. The UK is not in the Eurozone. This sentence is not about the UK in any way.
     

    Egmont

    Senior Member
    English - U.S.
    The UK is not in the Eurozone, but it is part of Europe and has close economic ties to the Eurozone. Therefore, problems in the Eurozone, such as the default of a Eurozone country on its loan payments (that's what "sovereign default" means) will affect the UK economy. That is what the rest of the quote is about.
     
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