Sovereign Debt Under Scrutiny. What To Do?

No one can deny that, nowadays, the different states of the world, developed or developing ones, have reached record levels of indebtedness. In this context, we can talk about a crisis or even some sovereign debt crises, and country risk suffered important changes. Many specialists have made and are making significant efforts in recent years, trying to identify thresholds of indebtedness for the countries of the world, to build reliable indicators of sovereign risk, in order to make possible a kind of alert (so important in the current international context), or to show from what level onwards public debt becomes toxic and affects growth. Relative to the impact of sovereign debt, it is clear that we already find ourselves in the field of uncertainty; of course, a high debt level is not synonymous with the disappearance of sustainability. This may, in our opinion, be analyzed correctly only on a case by case basis, taking into consideration the specificities of national economies, their performance, and the quality of economic policy measures. Therefore, can we achieve growth in the context of a significant debt? Default risk can be controlled without resorting routinely to restructuring? What relevant indicators of sovereign risk can be used by an investor or a bank? Here are some interesting questions to which economists must answer.