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Are Advanced Economies at Risk of Falling Into Debt Traps?

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Are Advanced Economies at Risk of Falling Into Debt Traps?

Bruegel,

5 min read
5 take-aways
Audio & text

What's inside?

Rising government debt has serious ramifications for economic growth.

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Editorial Rating

8

Qualities

  • Analytical
  • Innovative

Recommendation

Many advanced economies are confronting growing levels of sovereign debt: Gross debt-to-GDP ratios are surpassing 80% and in some cases exceeding 100%: Japan’s figure stands at nearly 250%. Professor Marek Dabrowski dissects the developed world’s current public borrowing and its implications for future growth. He posits that, without sizable fiscal reforms, advanced nations will face serious constraints on discretionary spending, as well as the specter of financial contagion if another economic crisis should unfold. getAbstract recommends his authoritative, sobering report to executives, officials and investors interested in understanding debt’s impacts on developed economies.

Summary

The advanced economies have seen massive increases in their public debt relative to their output. Following the 2008 financial meltdown, governments borrowed to replace diminished tax collections, help struggling financial institutions, augment social benefits for the jobless and provide economic stimulus. Now, with these economies growing at a tepid pace, sovereign debt is at levels not seen since the late 1940s. Notable countries with gross debt-to-GDP ratios above 100% include Japan (248.1%), Greece (178.4%), Italy (132.6%) and the United States (105.8%). Some nations with gross debt-to-GDP ratios of between...

About the Author

Marek Dabrowski is a nonresident scholar at Bruegel, a European think tank.

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