Government debt levels have spiked since the global financial crisis. But not all debt is created equal. Eighty percent of the debt of Portugal, recently bailed out by the International Monetary Fund and the E.U., is held outside its borders, much of it in Germany, France and the U.K. That matters. When there are problems, foreign investors are much more likely to sell, causing interest rates to spike and making it more difficult for a country to meet its obligations. What's more, foreign investors are particularly sensitive to inflation. So Germany and France--which, like Portugal, use the euro--would be unlikely to agree to devalue their common currency. That's one reason Japan, for instance, isn't a strong candidate for default (not yet, anyway), despite its very high debt level. Almost all of it is owned internally.