Life After Debt: What Comes Next?

Over the past few weeks, the world's public debt crisis, simmering for months, has come to the boil. When the problems were confined to small countries such as Greece and Ireland, it was assumed that any fallout could be contained. Now, however, the crisis has threatened to engulf nearly everyone. The high-wire confrontation over the debt ceiling in the U.S. Congress raised the prospect of a default by the world's biggest borrower. At the same time, the markets turned their attention to Italy, the eurozone's third-largest economy and the world's fourth-biggest debtor, threatening to raise its borrowing costs to unaffordable levels, or even to cut off its access to funds. The two crises differed in many ways -- not least in that America's borrowing costs fell while Italy's rose -- but the outcomes were similar in one respect: both countries have enacted plans to sharply cut their budget deficits.