”As soon as the epidemic was under control, government policies ceased to make common cause, and debts began to diverge, some (relative to GDP) returning to pre-pandemic levels, others not. The European pack split into three. Grouped alongside the Netherlands and Denmark on the left-hand side of our graph, the so-called “peripheral” countries (Spain, Portugal, Greece and Ireland) have experienced a kind of return to grace, twelve years after having shaken the Eurozone to its foundations. All of them have been through a serious financial crisis, necessitating severe adjustment programs; all of them have restored their primary budget accounts (excluding interest payments) to such an extent that their debt ratios have not only not drifted, but are now on a downward trend. Next in line are those for which, barring an economic recession or an unlikely fiscal turnaround, debt dynamics are not far from being stabilized. This group includes most of the so-called “frugal” countries of Northern Europe, as well as Italy.”
Morten W. Langer
