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Tag Archives: public debt

A world recovery fund to overcome developing countries’ post-covid debt woes?

Proposal to set up a World Recovery Fund (WRF), aimed at addressing some of the key problems with the design of the DSSI and more generally the existing international financial architecture for dealing with debt problems in the developing world. Read the full policy brief prepared for the International Finance Task Force of the Think20 (T20), the official engagement group of the G20.

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A green fiscal pact

How can the European Union increase green public investment while consolidating budget deficits? By: The Sound of Economics Date: September 29, 2021 Topic: European Macroeconomics & Governance Past crises and consolidation episodes have resulted in major public investment cuts. However, in order to meet the European Union’s climate goals, the additional public investment needed is between 0.5 percent and 1 percent of GDP annually during this decade. How does the EU grapple...

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A green fiscal pact: climate investment in times of budget consolidation

Budget consolidation in European Union countries should be possible within EU rules, but countries should agree a green fiscal pact to protect net-zero investment. This paper was prepared for the informal ECOFIN meeting in Ljubljana on 10/11 September 2021. The authors thank Klaas Lenaerts for his excellent research assistance and colleagues at Bruegel (Grégory Claeys, Maria Demertzis, André Sapir, Jean Pisani-Ferry and Simone Tagliapietra) for their feedback and suggestions. The...

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The risks from climate change to sovereign debt in Europe

European Union institutions and national fiscal authorities should incorporate climate risk in debt sustainability analysis. The author is a Professor at the University of Cyprus and Member of the Cyprus Academy of Sciences, Letters and Arts. Thanks are due to Roel Beetsma, Zsolt Darvas, Maria Demertzis, Demetris Georghiades, Barret Kupelian, Alexander Lehman, André Sapir, Rolf Strauch, Guntram Wolff, Georg Zachman, Theodoros Zachariades and participants in a European Stability Mechanism...

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Setting Europe’s economic recovery in motion: a first look at national plans

Plans for spending European Union recovery funds submitted by the four largest EU countries reflect rather different priorities. So far, only Italy is interested in borrowing from the EU. European Union countries are starting to set out how they plan to spend money from Next Generation EU (NGEU), the EU’s landmark instrument for recovery from the coronavirus pandemic. In late April, countries began submitting their recovery and resilience plans. A first quick analysis shows that the plans of...

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EU debt as insurance against catastrophic events in the euro area: the key questions and some answers

European Union debt can provide comprehensive insurance against the COVID-19 pandemic and can enable a macroeconomic response, even though EU debt is a liability for taxpayers in EU countries and therefore indirectly for national budgets. To establish it, countries will need to give up control over some spending and some revenues. To be politically sustainable, that control should not be intergovernmental but be grounded in EU institutions. The EU Treaty offers some possibilities, but treaty...

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The perils of more debt

Europe must find the “Ways and Means”. The Bank of England has yesterday announced that it “will directly finance the extra spending needs of the UK government on a temporary basis…allowing the Treasury to bypass the bond market.” This will be done through the “Ways and Means” (sic) facility that will rise to an undisclosed amount, meaning probably big. This will allow the government to meet its exorbitant cash needs without having to pile on marketable debt. This is an emergency facility but...

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Incorporating political risks into debt sustainability analysis

DSA applies to crisis countries only, but an early warning system identifying vulnerabilities is relevant for all countries. A more general, less stringent, debt vulnerabilities analysis (DVA) could be used to assess countries’ debt management policies and identify vulnerabilities, without leading immediately to policy consequences.When lenders such as the International Monetary Fund or the European Stability Mechanism want to assess whether a country meets the criteria for receiving...

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Whose (fiscal) debt is it anyway?

The authors map how much fiscal debt is in the hands of domestic and foreign holders in the euro area. While the market for debt was much more international prior to the crisis, this trend has since been reversed. At the same time, central banks have become important holders of fiscal debt. Figure 1 depicts the evolution of euro-area general government debt and whether it is in domestic or foreign hands. The investor base varies significantly across countries, but we do observe general...

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Is public debt a cheap lunch?

The fiscal and welfare costs of public debt, following Olivier Blanchard's presidential lecture at the American Economic Association, in which he suggested both might be lower than expected. We review his paper, along with several scholars' comments, and provide a quick comparison with the European context. Olivier Blanchard sparked a vivid debate with his last presidential lecture at the American Economic Association, focusing upon the costs associated with public debt. In a nutshell,...

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