And debt and deficit concerns will remain, with the virtual certainty of at least one sovereign debt restructuring in Europe.

The likelihood that budget deficit and debt targets will be missed is rising.

What does this imply for Europe s austerity debate? If foreign debt matters more than public debt, the key variable requiring adjustment is the external deficit, not the fiscal deficit.

After all, even deficit hawks acknowledge that we should be focusing not on today s deficit, but on the long term national debt.

Continued congressional polarization would maintain policy uncertainty, confound debt and deficit negotiations, and impede economic growth.

At the onset of its crisis, Argentina s budget deficit, public debt, and current account deficit (as a share of GDP) were about 3 , 50 and 2 , respectively.

The difference between the overall deficit and the primary deficit implies that the interest on the Greek national debt this year will be 4.1 of GDP.

First, different countries have different capacities to sustain public debt, depending on their initial deficit levels, existing debt burden, payment history, and policy credibility.

In advanced economies, projected rates of growth are not sufficient to avoid mounting debt and deficit problems.

The effect is greater when modest deficit and debt levels are exceeded and current account deficits are large.

For an American, there is a certain amusement in Australian worries about the deficit and debt their deficit as a percentage of GDP is less than half that of the US their gross national debt is less than a third.

Sustaining a high budget deficit over many years will lead to an unmanageable debt buildup, unless that debt is inflated away or restructured.

Thus, an economic policy that tackles America s debt and deficit makes up the main portion of the Strategy.

Needless to say, such an outcome would spell serious trouble for America s already contentious deficit and debt debate.

The United States and Japan remain important drivers of the global economy but face major debt and deficit challenges.

With the current account deficit now exceeding 5 of GDP, US foreign debt is rising fast.

The government has pledged to apply the proceeds of sales to reducing the public debt and the budget deficit.

Countries can reduce their national debt by narrowing the budget deficit or achieving a primary surplus (the fiscal balance minus interest payments on outstanding debt).

Meanwhile, deficit and debt indicators have worsened, both in absolute terms and relative to emerging economies, and the average risk premium on advanced economies debt now exceeds that for emerging economies.

Deficit fetishism never makes sense the national debt is only one side of a country s balance sheet.

If GDP falls, achieving a certain deficit and debt target (as a share of GDP) becomes impossible. This, indeed, was the debt death trap that engulfed Argentina between 1998 and 2001.

The budget cost increases every year, as more of the debt rolls over and that does not include agency debt and the large increase in the current account deficit to pay China, Japan, and other foreign holders of US debt.

At nearly 10 of GDP, the deficit is resulting in a mountain of debt that threatens America s future.

Moreover, France s rapidly worsening foreign trade deficit is boosting already excessive debt levels, while output is falling and unemployment is rising.

But Ireland, with previously modest deficit and debt levels, also suddenly and unexpectedly faces the same kind of issue, owing to the government s need to take over private debt from the banking sector.

In some countries, fiscal policy is crippled by legitimate fears that more deficit spending will trigger government debt crises.

In May 2010, financial markets lost confidence in the ability of Greece to manage its budget deficit and to repay its debt.

Even an economy with an overall budget deficit will have a declining government debt GDP ratio if the growth rate of its nominal GDP exceeds that of its debt.

The annual budget deficit is nearly 10 of GDP, higher than any of the eurozone countries. With nominal GDP stagnating, that deficit is causing the debt GDP ratio to rise by 10 annually.

And the system seems to work entering the crisis, US states had significantly lower deficit and debt ratios than the eurozone s vulnerable member states.

Even if this widens the deficit in the short run, it will reduce the national debt in the long run.

For Greece, with an overall deficit of 4.1 of GDP and a debt GDP ratio of 170 , the debt ratio would fall if the combination of inflation and real (inflation adjusted) GDP growth exceeded 2.4 .

With international investors no longer willing to finance this deficit, and even shying away from refinancing existing Greek debt, only three possibilities remain.

A direct effect of the higher interest rate would be to increase the budget deficit and the rate of growth of government debt.

The budget deficit for 2004 stood at an estimated 295 million and the country's total outstanding external debt is estimated at 846 million.

In this case, the overall Greek deficit would be about 15 of GDP, putting its debt on a rapidly exploding path.

Coming so shortly on the heels of the subprime crisis, the debate over the debt ceiling and the budget deficit is the last straw.

In fact, there is no simple relationship between the size of a government s deficit or debt and the interest rate that it must pay.

Sustainability of public debt has replaced sustainability of private debt as the biggest threat to financial stability, and the focus of debate about the US current account has shifted from the sustainability of foreign debt to the impact of reducing the external deficit on growth and employment.

The German model for resolving the debt crisis and returning to internal or external balance relies on fiscal consolidation and structural reforms for the deficit countries.

Eurozone members as a whole, they argue, have a lower budget deficit than the US and the United Kingdom, and a similar level of public debt.

It is deficit reduction, not debt, that is profligate, because it implies wastage of available human and physical capital, quite apart from the resulting misery.

At a minimum, that would mean reducing the deficit to a level that stops the rise in the debt to GDP ratio.

Investors need to be reassured that debt service costs are under control, and that debt volumes and deficit limits are firmly monitored in order to minimize default risks and strengthen banks ability to lay the groundwork for sustainable growth.

Stated differently, now that Greece has achieved a zero primary budget deficit, its debt burden will decline if its nominal growth rate exceeds the average interest that it pays on its government debt.