It is not at all clear whether there is a threshold of sustainability. We have seen crises erupt at very different levels of public debt. Public debt in Japan is currently at 240 per cent of GDP, but there has not been a crisis. We have seen other countries have debt crises at considerably lower levels of debt to GDP.
The market can turn on these countries very quickly. We do know that unhedged borrowing in foreign currency significantly increases the vulnerability. And, relatedly, the European situation highlights the issues that arise when the government doing the borrowing and the central bank are part of the same currency union but not the same country. On the private sector side, what are the appropriate metrics?