The current financial and economic crisis has highlighted once again that
a sustainable growth path cannot be achieved with permanent growth of
indebtedness in single sectors or countries. A debt-driven expansion, reflected
in ever-rising debt levels, has to come to an end at some point and
usually harbors the danger of a debt crisis. Such crises are usually associated
with major disruptions of normal business activities; sharp cutbacks
in expenditure in individual countries – necessary to reverse unsustainable
debt trends – risk triggering a recession in their trading partners as
well. As the imf confirms in its Autumn 2010 World Economic Outlook,
a financial crisis also often leads to permanent losses in output, thus making
it even more undesirable than normal recessions.
Based on the experience of the past 24 months, within the European
context, three levels of debt at the national level seem in need of control:
net government debt, gross debt in the financial sector, and net liabilities
of a country against the rest of the world