Debt-to-GDP ratios get all the headlines, but the number that actually determines whether a debt path is sustainable is quieter: the gap between a country’s growth rate and the interest rate it pays on its debt. When growth outpaces borrowing costs, debt-to-GDP can drift down even with a primary deficit. When the relationship flips, no amount of austerity buys you out of the arithmetic for long.
This is why two countries with identical debt-to-GDP ratios can face completely different market treatment. The one financing itself at 2% while growing at 3% is in a fundamentally different position than the one financing at 5% while growing at 1%, even if the ratio printed on the page is the same.
None of this is an argument for indifference to debt levels — it’s an argument for reading the growth-rate-minus-interest-rate gap alongside the ratio, not instead of it.