Euro zone: The public debt trap will inevitably become deeper

Although the euro zone is coming to the end of an expansion period, the ECB has not raised its interest rates. It is therefore impossible to use monetary policy for countercyclical purposes. Accordingly, a more expansionary fiscal policy - and therefore a further increase in the public debt ratio - would be the only way to fight the slowdown in euro-z one growth. So the public debt trap is getting deeper since it is impossible to raise interest rates as the public debt ratio is even higher. The inevitable dynamics will then be as follows: interest rates will remain zero while the public debt ratio will rise as a trend. We will look at the stability of this " Japanised " equilibrium; it requires the central bank to hold an increasing amount of public debt, and it therefore also requires a trend increase in the size of the central bank's balance sheet.