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Debt Crisis

A debt crisis occurs when a country, company, or individual is unable to meet its debt obligations, leading to a financial crisis. Debt crises are often triggered by excessive borrowing, poor economic management, or external shocks such as a global recession. Governments facing a debt crisis may default on their sovereign debt, while companies may declare bankruptcy. Debt crises can result in severe economic consequences, including inflation, austerity measures, and economic recessions.

Example

The European debt crisis in the early 2010s occurred when several countries, including Greece and Portugal, were unable to repay their debt, leading to austerity measures and economic hardship.

Key points

• A debt crisis occurs when a country, company, or individual is unable to meet debt obligations.

• It can lead to defaults, bankruptcies, and severe economic consequences.

• Common causes include excessive borrowing, poor financial management, and external shocks.

Quick Answers to Curious Questions

A debt crisis is often triggered by excessive borrowing, economic mismanagement, or external shocks such as a recession or a collapse in commodity prices.

A debt crisis can lead to inflation, austerity measures, defaults, and economic recessions, often causing widespread financial hardship.

The European debt crisis, particularly in Greece, is a prominent example, where excessive borrowing and mismanagement led to defaults and severe austerity.