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According to the Mayo Clinic, excessive alcohol consumption can increase a person's risk of developing type 2 diabetes. When women consume more than one drink per day, or when men consume more than two drinks per day, the pancreas may become inflamed. When inflammation develops, the pancreas may not be able to secrete insulin. This eventually leads to diabetes.
An important point to mention about alcohol and sugar levels is the sugar level crash that can happen - particularly over night. A short term affect of alcohol is that it can stop it from raising blood sugar. A lot of people with diabetes find that after drinking this can cause sugar levels to drop. People who take diabetic medication, particularly insulin, need to be aware of this and may need to adjust doses to prevent hypoglycemia.