"Debt remains a national responsibility" – The Economic Journal

"Debt remains a national responsibility" - The Economic Journal


Former Finance Minister Vítor Gaspar welcomes the new approach that the International Monetary Fund (IMF) suggests to assess countries' financial health. In an interview with "Jornal de Negócios", the current director of the IMF's budgetary affairs department argues that the budget deficit does not matter that much and it is preferable for the country to focus on public debt.

"The position of the IMF has been to recommend a reform of the current framework with the aim of simplifying it," says Vítor Gaspar to the economy daily. "This simplification would, to a large extent, involve the adoption of a two-pillar approach: an anchor, defined in terms of the debt ratio as a percentage of GDP, and an operational rule, preferably in the form of an annual ceiling on expenditure growth public. We welcome the fact that the debt-to-GDP ratio is the only budgetary anchor, and a rule about spending growth as the only operational goal. "

Vítor Gaspar explains that originally the 3% deficit limit was "conceived as a ceiling that would not be reached during the economic cycle", but ended up not having the desired effect. "Recent Fund studies suggest that it has become a sort of" magnet "that affects both surplus and deficit countries in opposite directions," he says.

The director of the IMF argues that the limits to the growth of the expense must be specific for each country and consistent with the limit of the tax by the budgetary anchor of the country. "There are still large fiscal differences in the euro zone. In the absence of mutualisation schemes, national debts are not consolidated at the level of the euro area. Debt remains a national responsibility, "he says.



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