What happens when a country has too much debt?

What happens to countries when they accumulate too much debt? What happens when a country is in debt?
  1. Taxes might increase by large amounts

    If a country has debt problems, taxes and other fees might be increased greatly to provide the country with some money to finance its operations.

  2. Currency might lose value

    The currency of a country might lose value if its debt grows too big. In such a case, the government might be forced to print more money, and as a result, its currency might go lower.

  3. Capital flows out

    When a country gets badly in debt, capital might flow out as investors might start believing that the country is no longer a safe place to invest in.

  4. Risk of default

    When a debt gets too high for a country to pay, the country might default or fail to pay interest in time. This can lead to a wide array of different problems.

  5. Extreme measures and additional payments

    Under such circumstances, a country might be forced to take extreme measures which are usually in the form of loading citizens with more payments.

  6. Getting more debt might be harder

    If a country has a bad economy and a large debt, getting more debt might become a problem. In some cases, that country can get more debt, but with much higher interest rates. (See What is the difference between public debt and external debt?)

  7. Many products might disappear from the market

    When a country develops a serious debt problem, money will usually be directed to basic necessities and so many products might disappear from the market.

  8. Standards of living go lower

    As the country’s currency lose value, the standards of living inside the country go lower. This usually happens if the debt is big and the economy is not going well. (See Why do countries devalue their currency?)

  9. Basic services might get disrupted

    In extreme cases, disruptions in basic services such as electricity and water may happen if the country is totally unable to pay for them.

  10. Riots might happen

    If the standard of living of the citizens is directly impacted as a result of a debt crisis, riots are usually expected to happen.

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