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Would a central bank of an OECD country let a fiscal solvency crisis start?
The private debt ratio in OECD countries has fallen significantly since the 2008 crisis, but the public debt ratio has risen sharply: in OECD countries, the risk is therefore a fiscal solvency crisis. Such a crisis has not arisen today despite the very high public debt ratios because in practically all OECD countries, long-term interest rates are much lower than growth rates, which ensures these countries’ solvency. Central banks can prevent long-term interest rates from rising: all they need to do is buy a sufficient quantity of bonds (resume quantitative easing). A fiscal solvency problem will therefore only appear in OECD countries if central banks let it. Is this a possibility , even inside the euro zone?
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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.
Patrick Artus
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