situations of macroeconomic inconsistencies, in which the satisfaction of the constraints imposed by resource availability requires a distribution of losses. We next turn to analyse each of those three blocks. 6.1 The constraints for debt sustainability The sustainability of the public debt depends, first, on the capacity of the public sector to meet its transversality condition, which states that the expected present discounted value of the primary balance must be equal to the value of the outstanding debt when the analysis is performed. There are several caveats that must be considered when we refer to the transversality condition of the public sector as the constraint that defines sustainability. First, at least some of the public debt may be denominated in foreign currency, which implies that the exchange rate is also a determinant of debt sustainability. This in turn means that the transversality condition of the aggregate economy(the sum of the intertemporal budget constraints of the public and the private sector, i.e. the balance of payments constraint, but ultimately the performance of the tradable sector) is also a constraint for debt sustainability. Second, not every level of primary balance may be feasible for a society given its economic, social, and political environment. For instance, it would be inconceivable that a country would turn over its entire GDP to foreign creditors, leaving its population destitute. How much of a country’s GDP can be turned over without setting in motion unacceptable political, social, and/or economic dynamics? World War II is often blamed on the victors of World War I for imposing harsh reparations on Germany – so harsh that the resulting adverse economic conditions set in motion very adverse politics. This means that there may be other non-economic constraints that determine debt sustainability – in the literature they have been dubbed“political constraints” or principles­based constraints(as those defined by the United Nations General Assembly Resolution A/RES/69/319 in 2015; see Guzman and Stiglitz, 2016b; Guzman, 2018). Obviously, there is judgment entailed in deciding where these constraints lie. Third, there are interactions between fiscal policies and fiscal outcomes, which takes us to another dimension of the debt sustainability analysis – namely, the endogenous feedback effects associated with economic policies, which we will analyse below. Fourth, the fact that the satisfaction of transversality conditions depends on expectations about variables that will be realized in the future means that the definition of beliefs for the distribution of the variables that enter the budget constraints is also an input for the DSA. For the policy analyst, what matters is their beliefs about the likelihood of various outcomes, but those in turn depend in part on beliefs about the beliefs of the agents in the economy; if they believe that the debt relief is insufficient, then they may not be willing to invest, given that they think the crisis will fester or recur; the policy analyst may think those agents’ beliefs are wrong – but she will have to deal with them as they are, and explore the consequences for debt sustainability. These beliefs(both on the part of agents and of the policy analyst) themselves are endogenous, and there obviously may be disagreements about both what those beliefs are and how they depend on the policies undertaken. The typical situation in debt negotiations features differences in views about the relevant constraints. Creditors typically claim that the maximum primary fiscal balance or the maximum trade balance that is feasible is larger than what the debtor claims. However, that is not always the case, for multiple reasons: first, there is the possibility of a problem of representation on the debtor side, as a government might favour interests that are Series: Debt Sustainability Assessments& Their Role in the International Financial Architecture 5