And the sudden awakening of market to credit risk on lending to Governments is much more damaging now, when Governments have accumulated so much debt, than if it had been a constant from the outset. Stressed countries have naturally turned, not only to the IMF, but also to their partners in the European Union for assistance in these circumstances.
The problem with foreign currency debt is that if the exchange rate falls, the debt burden rises. The results can be likened to a bank run, with rising debt burdens deterring foreign lenders, weakening the currency and pushing debt burdens even higher, deterring more lenders, and so forth.