Report
Patrick Artus

Should there be a standard public debt ratio?

The European Union’s fiscal rules cover both: The fiscal deficit (with a maximum deficit of 3% of GDP); The public debt ratio (with a return towards 60% of GDP). Are rules on the public debt ratio necessary or useful? Two points in particular should be noted: If there is a maximum for the total fiscal deficit, if the public debt ratio is higher, the primary fiscal surplus will also have to be higher: it is enough to have a total fiscal deficit rule for the public debt ratio to correct itself; The public debt ratio can be modified by a quantitative easing policy. In reality, it is equal to the total public debt ratio minus the outstanding public debt held by the central bank, since the central bank repays the governments the interest they pay on the part of the public debt held by the central bank. All things considered , a total fiscal deficit rule would therefore appear to be sufficient to prevent the public debt from becoming unsustainable.
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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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