These are the OECD countries that are paying the most for their debt

The rise in interest rates that we are witnessing this year by the monetary authorities to combat inflation, means A major blow to heavily indebted countries Because at the time of meeting the maturities of debts that have to be refinanced with new issues, the cost of the issue is higher.

For many years, deficit control has been a secondary issue for many developed countries, and this lack of budget stability has, in many cases, led to debt recording and, despite low interest rates, they were facing. High debt service payments.

From the point of view of the OECD countries, many countries maintain Public debt above 60% of GDPThe highest percentage is recorded in Greece (194.63%), Italy (156.14%), Portugal (138.76%), the United Kingdom (128.55%), Spain (122.43%), Belgium (120.17%) and France (118.5%). Among the 22 member countries of the Organization for Economic Co-operation and Development and the European Union (OECD-EU), total public government debt rose from 97% of GDP in 2019. to 115% in 2020.

Having a high debt can be a problem depending on its cost. At this point comes the country risk, which measures economic and political risks.. Economic risks are related to the state’s financial condition and its ability to repay its debts. But we also have the political risks associated with politicians in a country and the impact of their decisions on investments that will limit the ability to repay debt and also the willingness to repay it.

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but thanks Prolonged low interest ratesOECD governments have paid less on their debt in recent years, despite the fact that levels Sovereign debt is high It shows an upward trend in many countries. Even taking into account the increase in debt amounts caused by the COVID-19 crisis, interest spending on outstanding public debt continued to decline in most countries in 2020.

Interests

According to data from the Organization for Economic Co-operation and Developmentwill be the member country facing the greatest interest burden in 2021 Italy because it pays interest equivalent to 3.1% of its GDP. Next we have Greece at 2.6% and the US at 2.5%. In the case of the United States, its cost is contingent upon a Federal Reserve that traditionally maintains interest rates higher than those of the European Central Bank.

The average interest payment relative to the OECD’s GDP is 1.5%.. Above this are countries such as Hungary (2.3%), Iceland (2.2%), the United Kingdom (2.1%) and Spain (1.8%).

debt sustainability

Sovereign debt sustainability is an important issue The massive increases in debt since the 2008 economic crisis and more recently during the COVID-19 pandemic. In this context, some argue that debt sustainability risks drop dramatically as long as the interest rate is lower than the GDP growth rate.

While this is true The negative difference between interest rates and growth helps stabilize long-term debtThe dynamics of short-term debt also depends on the balance of the primary budget and the constant increase in debt.

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In the current situation, maintaining high debt increases countries’ exposure to increases and declines in growth rates, and Increases the risk of debt refinancing. This is even more important given the uncertainty and volatility we see today.

Although the financial response to the COVID-19 crisis has avoided harm in terms of employment, at the same time, Public debt relative to GDP has reached its highest level in several decadesadding to the upside before the crisis in sovereign debt.

Although debt has increased and so far, government interest payments have fallen since the 1980s, Reaching just over 1% of GDP in the average OECD economybeing the main catalyst does not stop the debt ball.

differential

With so much debt, today’s public finances are vulnerable to changes in economic conditions in general and interest rates in particular. For example, a decrease in GDP can lead to significant increases in the debt/GDP ratio. Refinancing risks exist and must be mitigated through debt maturity management To avoid concentrating large debt refinancing at a time of high interest rates. Central bank purchases of government bonds can also help mitigate refinancing risks,

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