The joint public debt of the euro countries decreased in the third quarter to 93% of the total economy. A decline from a quarter earlier, and a significant decline from a year earlier. Sounds like good news, but unfortunately it’s disappointing. “Not a penny was paid. Indeed, many euro countries have borrowed money,’ explains economist Edin Mujagic.
According to the economist this is due to the way in which the national debt is expressed. “We express it as a percentage of what we economists call nominal gross domestic product. This is real economic growth plus inflation. And we all know that inflation was certainly very high last year, so that means the debt mountain as a percentage of that nominal growth is much lower. This is the nuance that turns good news into bad news.
This effect is stronger in countries with high public debt. «For the Netherlands, public debt decreased by four percentage points. The absolute leader is Greece, where a quarter of the national debt has been extinguished compared to 2021. But not a cent has been repaid,’ says Mujagic. And that never really happens. Coincidentally, the Dutch state repaid two loans last year, from 1815 to 1896. So to indicate: yes, some are repaid, but usually that happens a hundred years later.’
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An often heard sound from our toilet is that we can’t keep spending money. However, according to Mujagic, the reduction of public debt leaves some room for manoeuvre. High inflation is anyone with high debts’ best friend. And who has the highest debts? Those are governments. The Netherlands has always had a reasonably low national debt, which is now even lower than what Europe wants. We have room to intervene if necessary.
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
