Forecast alarming the public debt
April 5, 2010
The diagnosis is known. The crisis is historic public finances in freefall. Deficits and debts have increased exponentially within the scope of recovery plans, rescue banks and the downturn. The OECD expects in 2011 a debt of industrialized countries to over 100% of GDP. Level difficult to sustain. But if these debts soared to 200, 300 or even 400% … This nightmare scenario is not from a book of science fiction, but a very serious study of the Bank for International Settlements (BIS).
First observation of the authors, the public debt will not decrease in the coming years despite the crisis. Theoretically, to achieve a stable debt, reduce government deficits.The task is difficult without good solid growth, even as interest rates fell to historically low levels and that governments can engage in fiscal policies are too strict, the risk just to curb the weak recovery. The OECD forecasts a deficit still high in 2011, beyond 10% for the United States, Great Britain and Greece.
A retired worker for a
More worrying are the prospects for the long term, because of the growing imbalance between workers and pensioners, which is linked to an aging population and declining birthrate. A phenomenon that will affect both the OECD countries as the BRICs – Brazil, Russia, India and Brazil. While there was an average of 27 retirees for every 100 workers in the OECD area in 2000, they should be 62 retirees for 2050.
The proportion in some countries could even be a pensioner for a worker. That means less tax revenue and higher expenses to cover pension and health costs. The burden is particularly heavy in Germany, the United Kingdom, Greece and the United States, where health expenditures are projected to double from 5% of GDP in 2011 to 10% by 2035.
If nothing is done, in terms of expenditure and revenue nor especially pensions, debts will fly by 2020: 300% of GDP in Japan, 200% in Britain and 150% in Belgium , France, Ireland, Greece, Italy and the United States. Worse, they could reach 500% in the U.S. in 2040 (that year, they might even represent 600% in Japan). At these levels, the markets would stop lending and debt service would be unbearable."The lesson is not that this could happen but that something must change," said the BBC one of the authors, Stephen Cecchetti.
ALSO READ:
"The British debt under surveillance
"The public debt reached 1.489 billion euros
"The United States pay more for their debt
The bargain debt Greek
Sorry, comments for this entry are closed at this time.