Europe’s Debt (Un)Sustainability: Looking Through Bohn’s Magnifying Glass

Europe’s Debt (Un)Sustainability
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Volume/Issue: Volume 2025 Issue 070
Publication date: April 2025
ISBN: 9798229008051
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Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Economics- Macroeconomics , Public Finance , Fiscal sustainability , public debt , the Bohn rule , United Kingdom , Fiscal stance , Output gap , Europe , Global

Summary

No large European countries and only few small ones have met the so-called Bohn rule during the past 40 years or so. The Bohn rule specifies that past increases of public debt need to be systematically compensated with current and future fiscal surpluses to stabilize debt at some steady-state level. We find that post-1980 European fiscal primary balances have been driven by spending growth and consumption smoothing. The results change little between periods before and after the global financial crisis.