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January 7, 2022updated 11 Jan 2022 4:49pm

Macro view: No urgency to reduce public debt ratios in Europe

Some economists believe that the bias of studies relating to negative growth effects stemming from higher public debt and an excessive political focus on reducing Europe’s public debt can be counterproductive in terms of debt sustainability.

Marcin Piatkowski

Marcin Piatkowski, a senior economist at the World Bank and an assistant professor of economics at Kozminski University in Warsaw, retweeted an article shared by Philipp Heimberger, an economist at the Vienna Institute for International Economic Studies (wiiw) and at the Institute for Comprehensive Analysis of the Economy (Johannes Kepler University Linz), on no clear evidence available of a uniform GDP threshold that public debt could be measured against, and also no urgency of reducing public debt ratios in Europe after the Covid-19 crisis.

Economic studies have earlier claimed a 90% public-debt-to-GDP threshold beyond which GDP growth falls, implying higher public debt amounted to low or bad growth. However, growing criticism and corrections led to the conclusion that there was no magic threshold beyond which growth fell sharply. Heimberger believes that the debate on public debt, growth and fiscal policy will gain momentum after the Covid-19 pandemic. In that context, European leaders, he opines, should avoid repeating the past mistakes.

Heimberger further argues that Europe’s decision-makers and economists should reconsider their recent belief in negative growth caused by increased debt to GDP ratios, and avoid returning to it after the pandemic.

Jason Schenker

Jason Schenker, the president of Prestige Economics and chairman of The Futurist Institute, shared an article on jobless claims rising modestly last week in the US, but they continue to be low. More importantly, initial jobless claims for people who lost their jobs and filed for unemployment last week were still below pre-Covid levels.

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Schenker believes that with signals of very few people losing their jobs is a positive sign for the US economy. It also indicates better work and career prospects for people in the months ahead after the pandemic.

Claudia Sahm

Claudia Sahm, economist and former director of macroeconomic policy at the Washington Center for Equitable Growth, and a section chief at the Board of Governors of the Federal Reserve System, tweeted on being fortunate and Arlington city having many resources, as schools have taken precautions right since the start of the Covid-19 pandemic. For instance, students are being tested regularly for SARS-CoV-2 infection this year with the consent of parents, while a transparent tracking system has been set up.

Arlington has one of the highest median family incomes in US, Claudia has stated. However, despite low Federal aid and supplies, Arlington Public Schools have promptly issued Covid-19 guidance, ordered masks and at-home test kits for staff and students, and have also issued guidelines to approach nearby clinics and centres for vaccine boosters for children aged above 12 years.

Students can now get tested in Arlington schools after registration for each child by their parents, and test results can be obtained within 24 hours.

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