What happens to my savings if my country defaults or restructures its debt?
In theory, anything can happen, and the world could end tomorrow.  However, with a reasonably sane financial plan you should be able to ride this out. If the government cannot or won't immediately pay its debt in full, the most immediate consequence is that people are going to be unwilling to lend any more money in future, except at very high rates to reflect the high risk of future default.   Presumably the government has got into this state by running a deficit (spending more than they collect in tax) and that is going to have to come to an abrupt end.  That means: higher taxes, public service retrenchments and restrictions of service, perhaps cuts to social benefits, etc. Countries that get into this state typically also have banks that have lent too much money to risky customers.  So you should also expect to see some banks get into trouble, which may mean customers who have money on deposit will have trouble getting it back.  In many cases governments will guarantee deposits, but perhaps only up to a particular ceiling like $100k. It would be very possible to lose everything if you have speculative investments geared by substantial loans.  If you have zero or moderate debt, your net wealth may decrease substantially (50%?) but there should be little prospect of it going to zero. It is possible governments will simply confiscate your property, but I think in a first-world EU country this is fairly unlikely to happen to bank accounts, houses, shares, etc. Typically, a default has led to a fall in the value of the country's currency.  In the eurozone that is more complex because the same currency is used by countries that are doing fairly well, and because there is also turbulence in other major currency regions (JPY, USD and GBP).  In some ways this makes the adjustment harder, because debts can't be inflated down. All of this obviously causes a lot of economic turbulence so you can expect house prices to fall, share prices to gyrate, unemployment to rise.  If you can afford it and come stomach the risk, it may turn out to be a good time to buy assets for the long term.   If you're reasonably young the largest impact on you won't be losing your current savings, but rather the impact on your future job prospects from this adjustment period. You never know, but I don't think the Weimar Republic wheelbarrows-of-banknotes situation is likely to recur; people are at least a bit smarter now and there is an inflation-targeting independent central bank. I think gold can have some room in a portfolio, but now is not the time to make a sudden drastic move into it.  Most middle class people cannot afford to have enough gold to support them for the rest of their life, though they may have enough for a rainy day or to act as a balancing component. So what I would do to cope with this is: be well diversified, be sufficiently conservatively positioned that I would sleep at night, and beyond that just ride it out and try not to worry too much. "The biggest risk you have when a country defaults on its currency is a major devaluation of the currency. Since the EURO is a fiat currency, like almost all developed nations, its ""promise"" comes from the expectation that its union and system will endure. The EURO is a basket of countries and as such could probably handle bailing out countries or possibly letting some default on their sovereign debt without killing the EURO itself. A similar reality happens in the United States with some level of regularity with state and municipal debt being considered riskier than Federal debt (it isn't uncommon for cities to default). The biggest reason the EURO will probably lose a LOT of value initially is if any nation defaults there isn't a track record as to how the EU member body will respond. Will some countries attempt to break out of the EU? If the member countries fracture then the EURO collapses rendering any and all EURO notes useless. It is that political stability that underlies the value of the EURO. If you are seriously concerned about the risk of a falling EURO and its long term stability then you'd do best buying a hedge currency or devising a basket of hedge currencies to diversify risk. Many will recommend you buy Gold or other precious metals, but I think the idea is silly at best. It is not only hard to buy precious metals at a ""fair"" value it is even harder to sell them at a fair value. Whatever currency you hold needs to be able to be used in transactions with ease. Doesn't do you any good having $20K in gold coins and no one willing to buy them (as the seller at the store will usually want currency and not gold coins). If you want to go the easy route you can follow the same line of reasoning Central Banks do. Buy USD and hold it. It is probably the world's safest currency to hold over a long period of time. Current US policy is inflationary so that won't help you gain value, but that depends on how the EU responds to a sovereign debt crisis; if one matures." "The danger to your savings depends on how much sovereign debt your bank is holding.  If the government defaults then the bank - if it is holding a lot of sovereign debt - could be short funds and not able to meet its obligations. I believe default is the best option for the Euro long term but it will be painful in the short term.  Yes, historically governments have shut down banks to prevent people from withdrawing their money in times of crisis.  See Argentina circa 2001 or US during Great Depression.  The government prevented people from withdrawing their money and people could do nothing while their money rapidly lost value. (See the emergency banking act where Title I, Section 4 authorizes the US president:""To make it illegal for a bank to do business during a national emergency (per section 2) without the approval of the President.""  FDR declared a banking holiday four days before the act was approved by Congress.  This documentary on the crisis in Argentina follows a woman as she tries to withdraw her savings from her bank but the government has prevented her from withdrawing her money.) If the printing press is chosen to avoid default then this will allow banks and governments to meet their obligations.  This, however, comes at the cost of a seriously debased euro (i.e. higher prices).  The euro could then soon become a hot potato as everyone tries to get rid of them before the ECB prints more.  The US dollar could meet the same fate. What can you do to avert these risks?  Yes, you could exchange into another currency.  Unfortunately the printing presses of most of the major central banks today are in overdrive.  This may preserve your savings temporarily. I would purchase some gold or silver coins and keep them in your possession.  This isolates you from the banking system and gold and silver have value anywhere you go.  The coins are also portable in case things really start to get interesting.  Attempt to purchase the coins with cash so there is no record of the purchase.  This may not be possible." First question:  Any, probably all, of the above. Second question:  The risk is that the currency will become worth less, or even worthless.  Most will resort to the printing press (inflation) which will tank the currency's purchasing power.  A different currency will have the same problem, but possibly less so than yours.  Real estate is a good deal.  So are eggs, if you were to ask a Weimar Germany farmer.  People will always need food and shelter. "This question is different because you are asking for actual advice vs. a more academic, ""what if"" scenario. The answer that I'll give will be different, and similar to another recent question on a similar vein. Basically, if you're living in a European country that's effectively in default and in need of a bailout, the range of things that can happen is difficult to predict... the fate of countries like Ireland and Greece, whatever the scenario, will be economic and social upheaval. But, this isn't the end of the world either... it's happened before and will happen again. As an individual, you need to start investing defensively in a manner appropriate for your level of wealth. Things to think about: I'd suggest reading ""A Free Nation Deep in Debt: The Financial Roots of Democracy""" My 0,02€ - I probably live in the same country as you. Stop worrying. The Euro zone has a 100.000€ guaranty deposit. So if any bank should fail, that's the amount you'll receive back. This applies to all bank accounts and deposits. Not to any investments. You should not have more than 100.000€ in any bank. So, lucky you, if you have more than that money, divide between a number of banks. As for the Euro, there might be an inflation, but at this moment the USA and China are in a currency battle that 'benefits' the Euro. Meaning you should not invest in dollars or yuan at this time. Look for undervalued currency to invest in as they should rise against the Euro. Best thing to do is convert your money into something that will retain value. Currency is a symbol of wealth, and can be significantly devalued with inflation. Something such as Gold or Silver might not allow you to see huge benefit, but its perhaps the safest bet (gold in particular, as silver is more volatile), as mentioned above, yes you do pay a little above spot price and receive a little below spot when and if you sell, but current projections for both gold and silver suggest that you won't lose money at least. Safe bet. Suggesting it is a bad idea at this time is just silly, and goes against the majority of advisers out there. I am going to add in an opinion here from the Wall Street Journal that I read this morning in What's at Stake in the Greek Vote, in light of current events and elections in Greece. The article claims that if the election results make it sound like a break from the Euro is imminent then ... we will see a full-fledged bank run. Greek banks would collapse ... The market exchange-rate would likely be two or three drachmas to the euro, which would double or triple the Greek price of imported goods within a few days. Prices of assets, including real-estate assets, would crumble. Those who moved their deposits abroad would be able to buy these assets cheaply, leading to a significant, regressive redistribution of Greek wealth. In short, you'd lose two-thirds of your savings unless you were storing them somewhere safe from the conversion. The article also predicts difficulty importing goods (other nations will demand to be paid in euro, not drachma) leading to disruption of trade and various supply shortages.  I will note that the predictions here seem to be in opposition to some other advice here which suggests that real estate will be an effective hedge. Remove your money.  If you do not need this money for some time, you can convert it to Gold, and now is a good time to buy.  Gold is not expected to decrease much in price as we're already at the bottom of the employment cycle and the Depression is already begun and will take about two years to grip the world.
The default of the country will affect the country obligations and what's tied to it. If you have treasury bonds, for example - they'll get hit. If you have cash currency - it will get hit. If you're invested in the stock market, however, it may plunge, but will recover, and in the long run you won't get hit. If you're invested in foreign countries (through foreign currency or foreign stocks that you hold), then the default of your local government may have less affect there, if at all. What you should not, in my humble opinion, be doing is digging holes in the ground or probably not exchange all your cash for gold (although it is considered  a safe anchor in case of monetary crisis, so may be worth considering some diversifying your portfolio with some gold). Splitting between banks might not make any difference at all because the value won't change, unless you think that one of the banks will fail (then just close the account there). The bottom line is that the key is diversifying, and you don't have to be a seasoned investor for that. I'm sure there are mutual funds in Greece, just pick several different funds (from several different companies) that provide diversified investment, and put your money there. When I read that part of his post, it reminded me more of credit companies rather than banks. People default on credit all the time. I have no idea what the regulations are on the amount of credit that a company can issue, though.  And this is sort of part of what actually happened in the beginning of the economic crunch. A bunch of people began to trade for credit (debt) against what they thought the *future* value of their house or other real estate would be. After a while, people stopped being able to afford property at its future value, so they stopped buying it. When people then tried to sell their property for the future value that they had borrowed against, they couldn't, so they couldn't pay back their debt.  Because real estate had become a popular investment vehicle for the middle class, this was able to reach a kind of critical mass, and shortly afterward the effects rippled back into the credit market, which also had its own crunch -- a bunch of credit just disappeared overnight because so many people had assumed a level of debt that they could not actually fulfill their promises on once the future value of their home became completely imaginary. I hope there's so much wrong with what I wrote, I do. Thank you for correcting me. For argument's sake, my following responses will assume that you are talking about the US market. Almost any other kind of argument would take too long to elaborate or expand upon.   In North America, the rules of Capitalism *are* somewhat ironclad, are they not? Did Americans have a debate over whether or not workers even have the right to strike, or collectively bargain, last year? Aside from that, I am aware hat other US companies do in fact offer much better benefits than others. Target, for example, offers much better healthcare insurance than Walmart does. This is among one of many boons that Target offers to its employees. It can be argued that Target treats its employees much better than Walmart, including its part-time employees. Why, therefore, is Target not much more popular than Walmart? My answer would be that the average consumer does not care about much except lower prices, and those consumers that do, do not shop at Walmart, which is still the most popular supermarket chain in the US. The consumers who do shop at a different or more expensive chain are therefore in the minority, whether because of morals or lack of choice. Corporations are amoral. They exist solely to make a profit, and nothing else. Compassion does not come into it. Higher standards are, and will expand, if there is consumer interest in them doing so.   Outsourcing definitely applies here. You've seen the self-checkout facilities available at most stores? When there is a way of scanning every product a person has on them before they exit the store as well as a way of preventing them from exiting the store before they've paid for those goods, you can bet anything on almost every cashier in America being fired from the stores that can afford it. We are very, very close to that, in terms of technology alone, let alone deployment.   The US cannot afford to impose tariffs, unfortunately. With every anti-competitive tariff it imposes, exports and imports go down in the billions of dollar ranges. It is not a coincidence that the Eurozone countries who have led the way in tariffs are those you names in your post. In the age of globalisation, everyone can simply go...somewhere else for their needs. The same unfortunately goes for taxes, import premiums, or anything else that you care to name. I agree with you that fighting for labour rights across the world is the only effective answer to that.  But that will of course never happen. When labour rights issues erupt in the country that the majority of the world's manufacturing happens, most corporations will simply stick with it until their position becomes untenable, and then they will move to a different country, where labour laws are not as as strong. China is this generation's manufacturing bitch, who will be next? Because companies are worrying about this already.They are looking at shithole places in India, and places in Brazil, and places in Ghana, or Indonesia, or anywhere else that can be persuaded to educate a proportion of its workforce to the minimum necessary levels. It's sad but, remember that if any thought is applied to this, the people who make the things that Chinese/Indian/Ghanan/Indonesian make for pennies on the dollar is that those people's wages will eventually rise enough that there can be a middle-class, at which point the companies involved simply move on to a country that does not have a middle-class or a higher-working class. Forever. That's...the multinational plan. Capitalism, remember, is a system based on unlimited expansion. It just is. No arguing round that one.    And finally, 'fiscally sensible' means, to me, that a country retreats from the goddamn cliff it's on when it sees that if it carries on this way, it's truly, amazingly fucked. The debt ceiling fiasco earlier nearly plunged the world economy into recession, in spite of the fact that it should have been a done deal, something nobody anywhere got their tits up about. But no. Politicians literally ransomed it for things that they wanted that were kinda contrary to the interests of the US economy at large, and therefore the fucking WORLD economy at large. If the US had defaulted, it would have fairly literally fucked to rest of us. And I mean the other 670,000,000,000 people alive right now. All coz your Republicans didn't like a black guy. What? Barack Obama does things by pretty classical Keynesian economics. By following those tenets, the whole goddamn world enjoyed a period of uninterrupted growth and prosperity from 1948 to about 1970, depending on where you are. Talk to me all you like about Europe's destroyed industry from WW2 but the simple fact is that the maxim of 'save during booms' and 'spend during busts' created more jobs and helped more economies that you can name. Thanks to political expediency, however, and apparently Reagan, the US at large seems to believe that anything even approaching left-wing politics (and for the purposes of this argument that includes healthcare and, y'know, not caring what or who a woman puts up their vagina) is anathema. It simply isn't accepted, and decried as 'socialism' by any opponents. These arguments and these debates literally don't make any fucking sense to the rest of us. Not even a little bit. Abortion, gay marriage, legalizing marijuana, *NOT* invading other countries. These issues are settled for the vast, vast majority of us. It's fucking insane to us that they aren't for you.   In fairness it is, however, because of your politics that you can't do any of these things. You are a nation of three hundred and fifteen million. It can't be expected of you that you have a consensus on these issues. But what gets us is that you never fucking try. We have the European Parliament, imperfect though it may be. It still gives us a voice in issues as basic as gay marriage or abortion. We aren't in permanent deadlock over things as unimportant as this.   I don't mean to paint Europe or anywhere else as some kind of paradise. Just that companies in Europe seem to just not care; companies in the US seem to be out to try and actively fuck you.     Quick edit: holy shit that was a long reply, don't bother reading it.   TL;DR: Companies don't give a shit if they fuck you or not unless market conditions It is basically the same situation what US was when the crash happened. People took on debt without the means to pay, even with awful credit records. But the problem isn't the debt people take on themselves, but with the limited disposable income they have how efficiently can their debts be serviced. And how do banks who lend out money can recover their money. When banks lend money to all and sundry, they have to take care of defaults and that is when financial wizardry comes into play. In US people have the option to default on their debt and refinance it, so banks assumed default and tried to hedge their risks. If this is an option in Australia, be ready for a crash else not to worry about much. If banks continue lending expect higher inflation rates, higher interest rates and maybe a downgrade of bonds issued by the Australian government. Higher import costs and a boom in exports because of devalued Australian dollar. Firstly, comparing debt to GDP is comparing a stock to a flow, you're committing a transgression that is warned about in Econ 101.  Secondly, I appreciate your concern about the height of debt but it's really just a measure of the flow of capital. Debt is an investment too, and the headline debt number mixes government, corporate, and consumer debt which have very different attributes. In fact the holders of most government debt are normal citizens and pensioners. More concerning might be the levels of *consumer* debt, but (I would argue) that only becomes an issue if debt starts being issued fraudulently to people who shouldn't be receiving it, e.g. ahead of the mortgage crisis.   There may be nothing I can say to convince you otherwise, and I'm not saying that overleveraging *isn't* something to be concerned about, but I'm trying to remind you that the story is more complicated than you're letting on.  Finally, respectfully, please don't scaremonger about derivatives. The notional value is very high, but derivatives are a zero-sum market (unlike the stock market, e.g.), and in fact the majority of derivatives are for hedging and reducing risk. While it's certainly possible to use derivatives to leverage oneself, this really only happens with hedge fund-type operations, and even if the derivative market blew up I highly doubt it would affect average people very much.  TL;DR, If there's another crash in the next 5 years, I doubt it will be due to debt (outside of *perhaps* China, but I think that'd lead to more of a recession than a full blown 2008-esque crisis). It definitely will not be because of derivatives. "Here's some way of thinking about it, and I'm not really sure if it's completely correct, but sometimes we oversimplify when trying to tell a five year old :)  Say there are two people in the world. You and me. We both have $100. A total of $200 in the world.  Suddenly, a wild bank appears. I deposit my $100 in the bank. I still have $100 and you still have $100. Now you want to buy something from me that costs $150. You go to the bank to loan money. The bank has $100 available so gives you $50. You give me $150. Now I have $250 and you are $50 in debt. I deposit the $150 in the bank.  We do this again and again, until I have $1000 on my bank account, and you are $900 in debt. I want to buy a house of $500 and go to my bank, demanding to take out $500. But there is only $200 in the whole world so the bank can only give me $200.  ""Money"" has been created out of thin air, but it's actually you who are in debt. If you go bankrupt, the bank has a big debt it won't get back, and is in deep shit when I come around to demand my money back. At that point governments step in to loan the bank money for cheap, because if the bank fails, I will lose all my pension savings I put into that bank, as well as my companies and a lot of my employees.  And other banks loaned this bank money, so if this bank fails, the other banks will be in the exact same position and will also fail, because then they will also have debts that won't be paid back.  There are regulations minimizing this - i.e. a bank is required to keep a percentage of the amount of money on its accounts, so there's a maximum limit of ""money created""." You forgot the biggest thing: Japan still controls its own currency and Greece does not.   If you don't control your currency, you have much more limited options when it comes to borrowing money. It is why US states can't borrow a lot of money, they all have to share the US dollar which no one state controls. So states are used to making cutbacks in hard times, but the Eurozone nations have not adopted this mindset.  Greece isn't in trouble because it borrowed too much, it's in trouble because it borrowed so much *and has to share the Euro*. Greece can't inflate its currency, so if they can't make a payment they default, no one wants to lend to a place that might default. If Greece had its own currency still there would be no currency crisis in Europe, just some inflation. Don't worry. The Cyprus situation could only occur because those banks were paying interest rates well above EU market rates, and the government did not tax them at all. Even the one-time 6.75% tax discussed is comparable to e.g. Germany and the Netherlands, if you average over the last 5 years. The simple solution is to just spread your money over multiple banks, with assets at each bank staying below EUR 100.000. There are more than 100 banks large enough that they'll come under ECB supervision this year; you'd be able to squirrel away over 10 million there. (Each branch of the Dutch Rabobank is insured individually, so you could even save 14 million there alone, and they're collectively AAA-rated.) Additionally, those savings will then be backed by more than 10 governments, many of which are still AAA-rated.  Once you have to worry about those limits, you should really talk to an independent advisor. Investing in AAA government bonds is also pretty safe. The examples given by littleadv all involve known risky bonds. E.g. Argentina was on a credit watch, and paying 16% interest rates.