A debt crisis occurs when a government becomes unable to repay its financial obligations, typically resulting from prolonged expenditures exceeding tax revenues. This dire situation can lead to a "debt wall," where a nation's reliance on foreign capital ceases, causing its currency to devalue significantly and making foreign-denominated debt much more expensive.

Notable examples include Latin American countries in the 1980s, the United States and European Union since the mid-2000s, and China's debt crises in 2015, with over 50 countries reportedly in crisis in 2024. A prominent instance is the European debt crisis, which began in late 2009, severely impacting Eurozone nations like the "PIIGS" (Portugal, Ireland, Italy, Greece, Spain) who required assistance from entities like the International Monetary Fund. This crisis was fueled by high-risk lending, burst real estate bubbles, hefty deficit spending, and the preceding 2008 financial crisis, ultimately leading to investor withdrawal and a devalued Euro.