Hi doma,
I wonder if it has occurred to you that the value and income you can generate from what you do as a result of borrowing money might actually be worth more to you than the cost of the interest you bear.
This idea is behind student loans and the borrowing costs behind the Hoover Dam, for instance.
It may even make sense to keep paying interest rather than paying back principal if the way that you would fund the payback of principal would be to issue new debt at higher rates with a fixed maturity. Hence, the Napoleonic era bonds you are talking about.
Here's something from the Beeb for you:
"Yet for Dr Tim Leunig, lecturer in economic history at the LSE, it's no surprise that the UK chose to keep this low-interest loan going rather than pay it off early.
"Nobody pays off their student loan early, unless they are a nutter. Even if you've got the money to pay it off early, you should just put it in a bank and pocket the interest."
And if it seems strange to the non-economist that WWII debts are still knocking around after 60 years, there are debts that predate the Napoleonic wars. Dr Leunig says the government is still paying out on these "consol" bonds, because it is better value for taxpayers to keep paying the 2.5% interest than to buy back the bonds." http://news.bbc.co.uk/2/hi/uk_news/magazine/4757181.stm
The amounts involved are pretty tiny, of course. The value of the currency has declined a good deal over time.
The usual way to consider whether a country is excessively indebted is to look at the debt relative to GDP. The UK's debt at the end of World War 2 was considerably higher than it is presently.
Fortunately, as interest rates are currently low, more debt can be borne.
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