Climbing Out of Debt

• Author: Alberto Alesina, Carlo A. Favero, and Francesco Giavazzi
• Pages: 7-11

A

lmost a decade after t he onset of the global f‌inancia l crisis,

national debt in advanced ec onomies remains near its h ighest

level since World War II, averaging 104 percent of GDP. In

Japan, the ratio is 240 percent and in Greece a lmost 185 percent.

In Italy and Portugal, debt exceeds 120 percent of GDP. Without

measures either to cut spending or increa se revenue, the situation

will only get worse. As c entral banks abandon the extraordinar y

monetary measure s they adopted to battle the crisis, interest rates will

inevitably rise from historic lows. at mea ns interest payments will

eat up a growing share of government spending, leaving less money

to deliver public services or tak e steps to ensure long-term economic

growth, such as invest ing in infrastructure a nd education. Servicing

debt will become a major burden.

A new study of‌fers more evidence that cutting spending

is less harmful to growth than raising taxes

Alberto Alesina, Carlo A. Favero, and Francesco Giavazzi

ART: ISTOC K / 4X6, DANI ELVIL LENEU VE, PHA NASIT TI

March 2018 | FINANCE & DEVELOPMENT 7

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