The use of the term “sovereign risk” by Trade Minister Andrew Robb to describe the federal budget stalling in the senate shows just how fast and loosely the term has come to be used. But to whom is the risk? Who would bear the cost of the downside? What caused the risk? How big is the risk in the context of the overall costs and benefits of the action? Traditionally sovereign risk was the risk of less developed country governments defaulting on their foreign currency debt to banks or developed country governments. It could also be taken to include the risk of expropriation and nationalisation of private assets. More ... (full story)