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Crisis in Spending

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December 1, 2012

International Crisis in Lending
Lessons to be learned

Group V Samantha Jeffrey Gabriella Stankovic Na-taisha Williams
The debt crisis played a huge role in international lending. This report will discuss how economic crisis can result from many different factors such as changes in government policies which result in failure, and the cost of bank bailouts. Least developing countries also learned a lesson about how interest rates and low exports and imports played a major role in the financial crisis. These countries also tried to stabile their country's currency by fixing its exchange rate to that of the United States, which also resulted in failure. European countries also integrated their currency to Euro that caused a major crisis in lending. All are major factors that contributed to a crisis in international lending. Countries need to know what they are doing wrong before they can solve their problems. The historical events discuss will help serve as answer of how it can be resolved.
Sovereign risk is the risk of lending money to the government with the risk of not being able to repay the obligation. There is always a risk in lending but the previous debt crisis and the crisis that is occurring in Europe plays a role in whether financial institutes want to lend to governments. The sovereign risk is important in international lending because many countries borrow money and are unable to pay the money back. Greece is an example of a sovereign risk. Greece wanted to use EUROs instead of their previous currency but it failed and the backlash was that they fell into a debt crisis. Greece has borrowed money from the Europe central banks and the IMF but they are unable to pay the money back because of their financial and economic problem. The Greece economy has not

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