Climbing Out of Debt

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

A new study offers more evidence that cutting spending is less harmful to growth than raising taxes

 
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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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