Bankruptcy is a nasty condition a country may be forced into, representing the ill effects that happen when a sovereign state defaults on its debt.
Note that several major powers have scripted events called bankruptcies, but these are not true bankruptcies. They are normal events, typically causing inflation hits and some revolt risk. (The wiki has a page on the Spanish Bankruptcy Events.)
Cause of Bankruptcy
A country will go bankrupt on the first of a month, any time its high priority monthly outlays (for military maintenance and interest on loans) exceed its monthly income, and there is not enough money in its treasury to make up the difference.
In general, the reason bankruptcies happen is loans, especially when naive players renew them, thus causing sky-high interest rates.
Effects of Bankruptcy
When a country goes bankrupt, there are several effects. The following effects happen immediately:
- all loans are cancelled.
- +10% inflation, +1% for each loan cancelled.
- 3 points of stability are lost
- all accumulated investments in all four fields of technology are lost, and the accounts reset to zero.
- a rebellion check happens.
There are also several longer term effects of bankruptcy. Each of these last for 5 years (60 months) after the bankruptcy:
- Morale for all military units is halved, after all other modifiers.
- +1 revolt risk in all controlled cities
- double the normal war exhaustion in all controlled cities
- The interest rate for any new loans obtained is dramatically increased.
After the five years is up, there are no more effects of bankruptcy. Of course, the inflation it causes will still be there.