DEBT is the issue. The sub-prime parcel went round and round. But governments simply nationalised that $2 trillion when the music of Lehman Brothers and others stopped in September 2008. At $9 trillion, the combined public and private debt of the troubled European countries is another matter altogether, demeaning markets and injuring investors. The problem with sovereign debt is that there is no backstop; no lender of last resort.

It’s a complex nexus of inter-indebtedness. Italy, for example, owes France $511bn, or nearly 20 per cent of France’s GDP. Of Portugal’s $286bn of sovereign debt, nearly a third is held by, ah, Spain. What an unholy alliance. Greece, for example, isn’t so much indebted as insolvent. Small surprise. Google Earth has identified 17,000 pools in the suburbs of Athens. Yet only a princely 300 Demostheneses pay the swimming pool tax. Once again we are as a species surprised and disquieted – when, inevitably, the music stops. Well, the best hope for investors is that the “austerity packages” will be ones not just of form, but also of substance. With the FTSE 100 Index down almost 7 per cent in May, the packages will have to be good. Spain passing its tough budget, even if it was by only one vote, augurs well. After all, observes the optimist in me, South Korea and Indonesia flourished only after the Asian currency crisis of the late 1990s brought about budgetary restraints and financial reforms.

The pessimist in me, or perhaps that’s the realist, notes the European Central Bank’s warning yesterday that Eurozone banks face up to €195bn (£163bn) in a “second wave” of loan losses over the next 18 months. Meanwhile, against this overall background of indebtedness, specific tragedies like that affecting BP and the Gulf of Mexico have an exaggerated impact on markets overall.

So on balance? As a result of austerity budgets, growth will fall. But the growth we end up with will be better quality. In time this will be good for markets. Until then, I suspect, investors’ patience will continue to be tried by demanding debt.