At the end of 2001, for instance, when Argentina defaulted on the larger part of its public debt, the debt-to-GDP ratio was slightly above 50 per cent (though already 15 percentage points higher than three years earlier and 90 percentage points below its nominal value one year later, after the 1-to-1 peso-dollar parity had been abandoned).
By contrast, there are countries and governments that can sustain much higher borrowing levels. A striking case is Japan, whose public debt recently reached 220 per cent of GDP without giving rise to significant market tensions. Several authors have argued that the degree of debt intolerance ultimately depends on the quality of a country’s institutions.