Global Debt Crisis

Introduction

International credit often goes out of balance. The beginning of the 80s was marked by the world market for loan capital growing problem of debt in the center of which was traditionally a question about the debts of developing countries, constituting in 1992, about 1.7 trillion dollars (37.6% of the GNP of these countries). Foreign debt reforming Eastern European countries (including the states of the former USSR) stood at 192 billion dollars (24.9% of GNP).

What is the cause of the international debt crisis, what are the approaches of creditors and debtors to resolve this problem - the issues are extremely relevant for the global economy and require a thorough investigation (Wehbe, Pp. 27).

The objective of this paper is the international debt crisis as a phenomenon inherent in the global economy, the subject - how to resolve the international debt crisis and the issues faced by debtors and creditors in the way of solving the problem.

The purpose of this paper is to review the nature of the international debt crisis, as well as options for resolving the problem. To achieve this goal it is necessary to ensure the following objectives:

discover the essence of the international debt crisis;

define an approach to solving the problem of creditors;

define an approach to solving the problem of the debtor;

Reveal some emerging trends in this matter.

Causes of the international debt crisis

International debt crisis is one of the major problems in the functioning of the global economic system. Such crises begin with the fact that any country or group of countries to announce that it is impossible to pay their foreign debts and the cancellation of its debt is unavoidable. If the debtor has no desire to repay their debts, then making him the resumption of payments is very difficult and often impossible. This is explained by the fact that the borrower acts as a sovereign economic agent, often a foreign government. Submit to such a borrower penalties that apply to regular defaulter of any country is impossible. This demonstrates the specificity of international economic relations (Sahadi, Pp. 24).

The fact of bankruptcy violates the balance of international credit, difficult lending and borrowing process. When certain disorders take massive form, begins the next crisis in the world of debt.

Reasons that Lead to a Crisis of World Debt

External borrowing to increase the resources of economic development, but in the credits, sooner or later have to be calculated. External debt service has two aspects:

1) Payment of the principal amount of the loan;

2) Payment of interest on the loan.

Taken together, these payments are a direct deduction from the income and savings of the country of the debtor.

If a country increases the amount of external borrowing, and (or) increase the interest rates on loans, the cost of servicing the external debt are growing. Under normal circumstances, the external debt is serviced through foreign exchange earnings from exports of goods and services. Sometimes for the timely repayment of external debt the country is forced not only to increase the export of their products, ...