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How does the debt get split up when a country breaks up?

If, for example, Quebec were to separate from Canada, Quebec would probaly argue that it has no obligation to repay the debts to the Canadian government? It's hard to imagine how they could be forced to accept those debts as their own.

Now, if we imagine that all of Canada were to separate into smaller entities such that there was no clear 'Canada' remaining, what would happen to the debt?

Note that this question isn't about Canada in particular, it's about what would happen, in these cases, in general.

In particular, I'm looking for answers that explain what would happen if none of the states resulting from the separation resembled the original state that took on the debt. Clearly, none of them would have reason to accept the debt. But none would be more liable than the others.

Hal
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  • @RickSmith my question also asks what would happen if a country were to break up such that it wouldn't be clear how you could say that any one of the resulting entities is the original entity that took out the debt. – Hal Dec 30 '23 at 00:16
  • Irrelevant, it still comes down to negotiating an agreement between successor states and creditors. – Rick Smith Dec 30 '23 at 00:54
  • @RickSmith that's your take, but the point remains that it's a different question for the audience. (Aside: the answer you linked presumes that the main state would inherit the entire debt if the negotiation were unsuccessful. So it's not clear from the answer what would happen if there were no 'main' state remaining.) – Hal Dec 30 '23 at 01:02
  • The creditors would still be demanding repayment from someone and the new states would have very bad credit if they refused to pay. – Joe W Dec 30 '23 at 01:46
  • Some answers to the linked Q cover this too, e.g. https://politics.stackexchange.com/a/25527/18373 – the gods from engineering Dec 30 '23 at 01:53
  • I think part of the issue would require detailing how a country separated such that there was not a clear "Canada" post break. If every province secedes in some chronological order, the last one would likely be stuck holding the debt, presumably with each separated province in charge of the debt they inherited during secession. If they all agree to secede at the same time, the entity around Ontario/Ottawa likely could be stuck with the bill, or each capital is the indicating factor for regions that secede. It would likely end up case-by-case, depending on how the break-ups happened. – Alexander The 1st Dec 30 '23 at 07:40
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    I would have thought the critical question here would concern what currency the individual entities intended to make legal tender in their jurisdictions. And most importantly of all, if there was no clear plan for who was responsible for the debt, what would happen to the international value of that currency? If the Canadian dollar became worthless, how would any trade be conducted with the rest of the world? – WS2 Dec 30 '23 at 10:02
  • Without a clear plan the value of the bonds representing the debt would fall, and with them any confidence in future issues. – WS2 Dec 30 '23 at 11:40
  • There's nothing that definitively would happen; a case-by-case solution would have to be found. If one of the new nations found it politically desirable to claim to be the successor to the original nation, it might declare that it would honour the debts in order to bolster the claim; the Russian Federation essentially did this after the break up of the Soviet Union. But if every one of the new nations claims not to be a successor, then by their own laws none of them owes the debt so their own courts won't force them to pay. – Ben Dec 30 '23 at 13:06
  • If they're able to support their sovereignty, then there is no higher court that could force any standard rule to be applied. If none of them are the original nation, then they don't even have any pre-existing treaties where they have agreed to follow arbitration that could "force" someone to pay. It would have to be resolved through negotiation, diplomatic and financial pressure, etc (e.g. other countries might decide who they think ought to be the successor and sanction them until they acknowledge the debts, or sanction the whole group until they agree who will honour the debts). – Ben Dec 30 '23 at 13:08
  • It depends on the circumstances. E.g., Russia was considered the heir of the USSR - un terms of debt, place on the UNSC, etc. On the other hand, a century earlier Bolsheviks refused to inherit financial and ither responsibilities of the Russian empire, undermining their own international credibility. – Roger V. Dec 31 '23 at 16:04

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