PUBLIC DEBT AND COVID-19 CRISIS

In response to the coronavirus crisis, governments have taken unprecedented fiscal measures, which is expected to lead to an historic increase in public debt. This increase will occur against a backdrop of a decadeslong upward trend in public debt. The rise in global indebtedness coincides with a historic weakening of interest rates. In the short term, the low cost of public debt argues in favor of continued fiscal policy to support activity and employment. However, the risks associated with a high level of public debt remain significant, in particular reduced fiscal space to counter possible future economic downturns and a vulnerability to a reversal in market conditions. Therefore, ensuring long-term debt sustainability remains key.