In order to understand the size of western countries' public debt
problem, The Economist magazine has
prepared a particularly brilliant chart. Japan has already decided on a second
stimulus ($81 bn), whilst, in so trying, cutting out expenditure which has the least
impact. After more than 20 years of successive stimulus plans, Japan has
become master in the art of spending public funds without much to show for
it, except an astronomical public debt (nearly 200% of GDP forecast for
2010). This time the new Japanese
government is trying not to invest in infrastructure projects (like
previous projects which have covered the country in buildings, bridges and highways
of doubtful usefulness), instead trying to favor social investment to give
back buying power to the middle classes. It is a clever bet, but one which continues
to push Japanese debt towards dangerous levels, especially in terms of its cost
to future generations, and which exposes the country to an ongoing growing
risk for its debt.
For more than a year now, Germany has swung between stimulus
programs and controlling public deficits. In the medium term, constitutional
constraints on budget deficit control limit the likelihood of drifting. It is
unlikely that this situation will significantly develop in the coming months even if,
like other Eurozone countries, the new government authorizes itself to an
increase above 5% in the budget deficit in 2010. But with a debt reaching
`only 78% of GDP in
2010, the Federal Republic appears as the responsible pillar of
the Eurozone. That being said, it is the worst budget since 1945 and will
translate itself by massive Bund (German treasury bonds) sales, for a
total amount above the 2009 record of
329 bn euros.
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