The “Financial Times” newspaper reported that countries’ debts are rising to unprecedented levels, with debt growing faster than GDP, raising increasing concerns about the continuation of financial pressures on governments for a long time.
According to the report, the US government debt is approaching the 100% mark of GDP, while the national debt, including states, has exceeded 110%. Projections indicate that it may reach 156% by 2055 if spending continues at current rates.
Regarding Europe, the report explained that the situation does not seem much better, as debts are likely to double within 15 years unless spending is restricted. This may negatively affect growth and raise borrowing costs.
The “Financial Times” pointed out that Britain’s experience after World War II showed how inflation contributed to reducing debt from 250% to 42% of GDP over three decades. However, the current circumstances are different, as central banks are seeking to combat inflation, which limits the possibility of “liquidating” debts easily.
There are also political factors that increase the pressure, such as the rising average age of the population and increased defense budgets as a result of geopolitical tensions, which complicates debt management. In this context, the report quoted “Deutsche Bank” forecasts of weak productivity growth of only about 0.7%, which is an insufficient level to keep pace with the accelerating debt.
In conclusion, the report indicates that these indicators raise questions about the ability of governments to repay their debts in the future in a more difficult economic environment and rising borrowing costs. (Al Arabiya)
