January 1980 was not the best of times to be living in the Republic. That month an estimated 700,000 PAYE workers took to the streets to protest at inequalities in the tax system and in May the Taoiseach, Mr Jack Lynch, resigned to be replaced by the now disgraced Mr Charles Haughey.

By the end of the year inflation was running at 18 per cent and the average Irish household had debts that were the equivalent of 26 per cent of their annual disposable income.

Mr Haughey is now being held to account and the tax regime may be reformed, but one thing has not changed for the better since 1980. The rate of increase in personal debt has outstripped the increase in disposable income every year since 1980 with the exception of 1996.

Last year, according to the Central Bank, the average person had debts that were equivalent of to 69 per cent of their annual disposable income, which is defined as income after tax. Mortgages account for around three quarters of personal credit and new mortgage holders obviously have debts well in excess of 69 per cent of their disposable incomes. The average figure reflects the fact that many people have no mortgage or have paid most of it off. Economists predict that, by the end of this year, the average figure will have increased well into the mid-70s.

During 1997 and 1998 Irish personal borrowings grew by 20 per cent. Last year they grew by a record 26 per cent.

Ireland now has the fastest rate of growth in personal credit in Europe and it may yet prove to be the economic boom's Achilles heel.

What has allowed this situation to come about almost unnoticed has been the historic decline in interest rates.

Although people's debts may have increased, their annual interest bills, as a proportion of their disposable income, have remained much the same. Interest as a percentage of disposable income has remained at around 4 per cent every year for the last 20 apart from a spike in 1990 when it topped 6 per cent.

In 1980, the average overdraft rate was 17.21 per cent and the average mortgage rate was 14.2 per cent. Last year these rates averaged 10.4 per cent and 4.9 per cent respectively.

Interest rates are now firmly on an upward trajectory and the Government is hopeful that the overheating economy will start to cool down. The risk is that when the slowdown comes, the debts people have run up during the boom may prove unsustainable and the soft landing will turn into a slump as happened in Ireland and Britain in the 1980s.

At the moment the Irish authorities are not too concerned by the prospect of this scenario becoming a reality. The Central Bank has commissioned some research on the subject but the conclusions are that there is noting to worry about for the moment, as Irish debt levels are not high by international standards.

The report, Trends in Personal and Corporate Debt in Ireland: An Overview of Recent Developments, notes that "non-mortgage credit is rising very rapidly" but it says a rise in interest rates of almost three percentage points would be required before the impact on people's pockets of repaying their debts would return to its high of 1990.

The report also points out that we have lower levels of personal credit than all the members of the G7 group of large industrial nations apart from Italy.

Britain exceeded the 100 per cent mark for the ratio of personal credit to disposable incomes in 1987 and peaked at 117.1 per cent in 1990. It has declined to 111.2 per cent in 1998.

The United States and Germany have shown steady increases in the level of personal indebtedness since 1992, reaching 98.7 per cent and 78 per cent of disposable incomes respectively in 1998, according to the bank report.

"Household indebtedness in Ireland has been steadily increasing over the previous two decades, but continues to remain lower than in many other countries," concludes the report.

This may be so but it is clear that the traditionally cautious governor of the Central Bank, Mr Maurice O'Connell, is alive to the danger. He touched on the subject of personal credit last month in the Bank's annual report. He warned that Irish borrowings were increasing faster than the euro-zone average and that the Republic "could become the most borrowed of the lot".

Some private sector economists question whether the Republic might be much closer to receiving this unenviable economic accolade than the governor realises.

Mr Austin Hughes, chief economist with IIB bank, points out that the Central Bank's somewhat relaxed assessment of the situation is based on an international comparison using data for 1998. The rapid growth in personal credit in Ireland since then undermines the validity of the analysis.

Irish credit is growing at more than twice the euro-zone average of 10 per cent per year. He also points out that the Central Bank's figures do not take into account money borrowed from credit unions or leasing companies. Mr Hughes has analysed the situation from a different perspective. He has measured all consumer credit, including lending by credit unions and leasing companies, as a percentage of Gross National Product - the monetary value of all goods and services produced by the economy.

Irish consumer credit has grown rapidly of late from around 65 per cent of GNP in 1995 to 82 per cent in 1998 and the trend has continued.

"Bank loans to Irish residents currently stand around the euro average of 100 per cent of national income," according to Mr Hughes.

Given the continued high level of credit growth, more than twice the euro-zone average rate of 10 per cent a year, Ireland must now have one of the highest personal debt levels in Europe.

"Clearly, the current pace of debt build up is unsustainable in the medium term," says Mr Hughes. If we are not already, we soon will be ahead of Germany, France and Italy, the three largest economies in the euro zone and the one's whose economic requirements drive the policies of the European Central Bank.

The Central Bank may believe that interest rates rises of three percentage points - more than even the most pessimistic forecasters are predicting - would be needed before debt repayments really begin to bite, but there is already evidence of growing overborrowing.

The Money Advice and Budgeting Service sponsored by the Department of Social, Community and Family Affairs is seeing an increasing number of employed people who are looking for help, according to Mr Liam Edwards, the organisation's national co-ordinator.

Set up to help people on low incomes or dependent on social welfare, it gets around 10,000 new referrals every year. "The most common problem is people who have borrowed the maximum possible to buy a house and then have secondary borrowings for a car or furniture. Short-term borrowings can be crippling," says Mr Edwards.

It will not be until the economy does start to slow down that we will know if these levels of borrowing are unsustainable. By that stage it could be too late.