Follow us
Back to Flash&Facts

The Debt Burden

Many International Organisations are sounding the alarm about the huge public debt of the major advanced economies. Since the global financial crisis of 2008- 2009 public debt has increased substantially.This year, the public debt is expected to come close to 117.4% of their gross domestic product (GDP). These debt levels had not been seen since World War II.The accumulated debt has now exceeded US$ 100.000 billion! We must add to this mess the household debt which is currently estimated at some US$ 40.000 billion. But it is above all the growth of government debt which appears particularly problematic.The public debt is growing by about US$ 300.000 every second! Many economists believe that borrowing by the government can help stimulate the economy during times of recession and high unemployment. However, debt incurred during economic downturns should be paid out first as the global economy recovers. But many governments, for purely electoral reasons, are reluctant to increase taxes or cut spendings despite a clearly recovering economy. And public finances will be severly affected by another major issue.Governments will have to tackle the pension time bomb. Among OECD countries there were about 27 retirees for every 100 workers in 2000; the forecast is about 62 retirees for every 100 workers by 2050! The crisis required unconventional interventions, in particular billions injected into the system by the Central Banks. But unfortunately , today, as the world's economy is gathering steam, many States continue their lax and inadequate financial policies. Sovereign debt will have, one day, to be repaid. Finally, a threat which could have wideranging consequences: it is the impact that might have a substantial increase in interest rates on the financial burdens of many States. This will be interesting to watch.

Post a comment

Please check that the information in the fields here below is correct.

Your comment is awaiting approval and will soon appear below!

Comments :

  • No comments


Stay Informed about the Latest News

Created by