As the global economy continues to face the ravages of the crisis, it seemed only a matter of time before we saw a government go bankrupt.  Today it appears that Ecuador has claimed the unfortunate title of the first sovereign state to default on its debt since the crisis began this morning - and it’s not because they don’t have enough funds to pay the bonds.  President Rafael Correa, one who is not known for his restraint, has quickly made the default very antagonistic toward the bond holders, which presents not only a very interesting legal challenge but also some fundamental aspects of corporate foreign policy:

Mr. Correa, a U.S.-trained economist and ally of anti-U.S. Venezuelan President Hugo Chavez, refused to make a $31-million (U.S.) interest payment due on Monday on 2012 global bonds, saying the debt was contracted illegally by a previous administration.

“I gave the order not to pay the interest and to go into default,” Mr. Correa said. “We know very well who we are up against – real monsters.”

Speaking at a news conference in the OPEC nation’s largest city of Guayaquil, Mr. Correa said he will also offer bond holders a restructuring deal. Ecuador’s global bonds – the 2012s, 2015s and 2030s – total $3.8-billion of its roughly $10-billion debt.

Ecuador, which received record income from oil exports for much of the year, has enough funds to make the payment. But the nation’s policy is driven by Mr. Correa’s ideological rejection of such debt deals with foreign investors, Wall Street economists say.