Report
Patrick Artus

How should public debt ratios be managed once the coronavirus crisis is over?

Public debt ratios will be extremely high in OECD countries once the coronavirus crisis is over . This raises many questions about economic policies after the crisis. Will governments try to reduce public debt ratios through a more restrictive fiscal policy? The answer is probably no; the euro zone in particular will want to avoid the mistake of the 2010-2014 period: another recession as a result of a fiscal policy that became restrictive too soon. Is there a risk of a crisis related to a loss of fiscal solvency or of a public debt restructuring crisis? The answer is no: If central banks never reduce the size of their balance sheet; If they keep interest rates low. The consequence of high public debt would therefore primarily be strong pressure on central banks, and the risk of conflicts of objectives for monetary policy if, for example, inflation rises or there is a real estate price bubble.
Provider
Natixis
Natixis

Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.

 

Analysts
Patrick Artus

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