Debt Trap

clipped from www.telegraph.co.uk The key thing to watch out for is the rising burden of interest payments as a percentage of government revenues. Most major economies are still well below the danger point of 10pc, where without radical action debt begins to compound, but such is the accumulation of borrowing that some will be perilously close or even through it in four years' time. On present projections, some smaller countries will also breach the 12.5pc level which credit rating agencies judge to be the point of no return. What makes the position doubly worrying is that it only requires interest rates to rise a bit to put Britain and others in just such a debt trap. The flip side of economic recovery would be government bankruptcy. Yields are still tame. But, as the IMF has remarked, markets tend to react late and abruptly to changed fiscal circumstances.