Important disclosures and certifications are contained from page 10 of this report. https://research.danskebank.com

Investment Research — General Market Conditions

In this publication we take a closer look at how countries could deal with their

post-coronavirus debt piles. We think it is important that governments find a way

to make credible commitments to sustainable fiscal policies once their economies

have returned to full employment. One way to do this could be through adopting

national fiscal rules or strengthening efforts to lift potential growth.

With central banks keeping a lid on borrowing costs, there is reason to believe that

a continued negative interest rate-growth differential will prevent debt ratios from

rising after the initial coronavirus fiscal splurge. However, counting on interest

rates to stay low forever can be a dangerous strategy and financial repression is

not without costs, especially if it leads to an erosion of central bank independence.

Our calculations show that most countries would experience a gradual erosion of

debt levels if they were to return to their 2019 primary balances and interest-rate

growth differentials. An exception to this are the US and to some extent France

and Italy, which would need to increase their fiscal effort to stabilise debt at

current interest rate levels.

Countries that cannot rely on a negative interest rate-growth differential need to

find other ways to render debt levels sustainable, through either inflating away

their debt pile or adopting fiscal austerity. However, eroding debt through higher

inflation is easier said than done and the intellectual tide has turned against fiscal

austerity.

Given the greater political and market acceptance of higher debt burdens, we

expect policymakers to take a very cautious approach to fiscal consolidation,

leading many countries to choose to live with permanently higher debt burdens.

France, Italy and US need to undertake further fiscal consolidation to stabilise debt

i: Implicit interest rate on public debt g: nominal GDP growth rate

2019 values taken for i, g and primary balance. 2020 Commission forecasts taken for debt to GDP ratio. Red

cell indicates that a fiscal effort is required to increase primary balance or actual interest rate is too high to

stabilize debt.

Source: European Commission, Macrobond Financial, Danske Bank

Actual i g i-gDebt to

GDP ratio

Actual primary balance

Required primary

balance for stable debt

ratio

Change required in

primary balance to

stabilize debt

Required i for stable debt ratio

Change required in i to stabilize

debt

DE 1.3% 2.7% -1.4% 76% 2.3% -1.0% -3.3% 5.8% 4.5

FR 1.5% 2.8% -1.3% 117% -1.6% -1.5% 0.1% 1.4% -0.1

IT 2.5% 1.2% 1.3% 159% 1.7% 2.1% 0.3% 2.3% -0.2

ES 2.4% 3.6% -1.2% 116% -0.5% -1.3% -0.8% 3.1% 0.7

EA19 1.9% 3.0% -1.1% 103% 1.0% -1.1% -2.1% 4.0% 2.1

US 3.7% 4.1% -0.4% 136% -3.3% -0.5% 2.8% 1.6% -2.2

JP 0.7% 1.2% -0.6% 254% -0.8% -1.5% -0.7% 0.9% 0.3

UK 2.6% 3.3% -0.7% 102% 0.1% -0.7% -0.8% 3.4% 0.8

30 September 2020

Senior Analyst Aila Mihr +45 45 12 85 35 amih@danskebank.dk

Chief ECB Strategist Piet P. H. Christiansen +45 45 13 20 21 phai@danskebank.dk

Senior Analyst Mikael Olai Milhøj +45 45 12 76 07 milh@danskebank.dk

Analyst Bjørn Tangaa Sillemann +45 45 12 82 29 bjsi@danskebank.dk

Research Global

Public debt levels post COVID-19: much ado about nothing?

Other reading

The Big Picture: Global recovery

on track, 14 September 2020

Research US: Election dominated

by COVID-19 and Fed policy, 7

September 2020

FI Strategy: EU as an issuer - the

recovery fund, 26 June 2020

2 | 30 September 2020 https://research.danskebank.com

Research Global

Act I. Setting the debt scene - coronavirus crisis pushes public

debt levels to historical highs

As governments scramble to cushion the repercussions of the economic fallout in a

post COVID-19 world, debt levels and deficits in advanced and emerging economies

are set to experience marked increases in 2020. The sources of debt build-up are

manifold and include discretionary coronavirus-related spending (i.e. healthcare, direct

cash handouts, wage subsidies etc.), automatic stabilisers (i.e. higher unemployment

benefits and falling tax revenues with the plunge of economic activity) as well as losses

incurred on liquidity support measures to firms through state guarantees. While the full

extent of the economic damage of the coronavirus crisis is as of yet unknown, debt levels

in advanced economies are expected to rise between 15 to 30 percentage points and 5 to 15

percentage points for emerging markets according to the latest IMF projections. This comes

on top of the already high debt levels accumulated during the Global Financial Crisis

(GFC).

Ballooning budget deficits…

… to push public debt levels to new

highs

Source: IMF, Macrobond Financial, Danske Bank Source: IMF, Macrobond Financial, Danske Bank

High debt levels as such are not a new feature and have occurred previously during

exceptional circumstances such as wars. Shortly after the end of the Second World War,

UK government debt peaked at around 270% of GDP. Over the subsequent three decades,

the debt ratio fell steadily to around 50% of GDP. A key aspect of this debt reduction was

in part a relatively high primary surplus of 1.6% of GDP a year and high nominal growth

of 8.8% a year on average (of which 2.3% was due to real GDP growth and 6.5% due to

average annual inflation). However, ‘financial repression’ under the Bretton Woods system

was also an important factor that kept government borrowing costs low at 3.6% on average,

ensuring a steady debt reduction.

A combination of normalising economic conditions, fiscal restraint and financial

repression to maintain low borrowing costs has so far always succeeded in bringing

debt back to a sustainable level in the aftermath of crises, although it took many

decades in some cases. With COVID-19 being a type of war-like event (this time against

a virus instead of a country though), a spike in public debt levels does not seem so much

out of the ordinary with recent economic history. So should markets just shrug off the rising

debt fears and bet on the history of eventual public debt normalisation repeating itself?

Act II. Of Sinners and Saints

Before looking into ways for countries to address their post-coronavirus debt piles, let’s

take a step back and look at what fiscal strategies countries have adopted to deal with the

debt overhang following the GFC. Both Saints (Germany) and Sinners (Italy, US) can be

found:

High public debt levels are not a new

feature…

Source: CBO, Bank of England, Macrobond

Financial, Danske Bank

… but IMF expects post-coronavirus

debt levels to exceed post-WW II peak

Source: IMF

3 | 30 September 2020 https://research.danskebank.com

Research Global

Euro area. Germany’s constitutional debt brake that came into force in 2011 was a

major contributor to the steady decline in German and euro area debt levels that started

thereafter, helping the primary balance swing into positive territory. However, while

Germany was able to reduce its post GFC debt pile, a similar trend failed to materialise

in France, Spain and Italy, where public debt levels continued to rise. The driving

factors behind this development differ between the countries. With the advent of the

ECB asset purchase programmes in 2015, all benefitted from declining borrowing costs

that drove the euro area interest rate-growth differential into sub-zero territory.

However, slow progress to bring primary balances into positive territory hampered debt

reduction in France and Spain, a problem likely augmented by electoral cycles and

political uncertainty. Italy on the other hand has consistently run primary surpluses ever

since 2010, but lacklustre (trend) growth and occasional spikes in borrowing costs (as

political risks flared up) meant that its positive interest rate-growth differential failed

to do more than stabilise debt at high levels (see p.8).

US. Also the US debt to GDP ratio failed to revert to a more sustainable path following

the GFC despite falling debt servicing costs. The main reason was the slow pace of

fiscal consolidation with a range of legislation enacted that affected the budget such as

the Affordable Care Act (2010), which meant ‘too high’ primary deficits were run up

to 2012. Thereafter, fiscal efforts where stepped up by the Obama administration (e.g.

with the Budget Control Act (2011) and American Taxpayer Relief Act (2012)) and an

increasingly negative interest-rate-growth differential helped at least stabilising the

debt pile. However, with the advent of the Trump administration’s pro-cyclical fiscal

easing package in 2018, that included sweeping tax cuts for higher income taxpayers

and corporations, the primary deficit again saw a marked deterioration, pushing the debt

ratio on an upward sloping path even before the coronavirus crisis hit. Another worry

is that the US structural deficit is increasing. The main reason is population aging,

leading to higher spending on social security and the major health care programmes

(primarily Medicare). According to CBO, the federal spending for people aged 65 or

older will account for half of all federal non-interest spending in 2049 compared to two-

fifths today.

UK. Entering the GFC with relatively low debt levels of 49% of GDP in 2008, the - by

then - biggest budget deficit in peacetime history nearly caused a doubling of the UK

debt to GDP ratio in subsequent years (see p.9). However, since the crisis, successive

governments have planned and pursued fiscal consolidation, in an attempt to reduce

structural public sector borrowing. The combination of an improving primary balance

(that turned from a deficit of -8.3% in 2008 into a surplus in 2017), decent, if

unspectacular, nominal growth rates of 3-4% and record-low borrowing costs helped

the government not only to stabilise the debt dynamics, but even achieve small debt

reductions again in 2018 and 2019.

Japan. Rooted in Japan’s financial crisis and economic stagnation since the 1990s,

Japan’s debt pile was already the highest amid advanced economies before it entered

the GFC. As the first post-war economy to fall into the liquidity trap, a large scale fiscal

easing strategy was needed to kick-start the Japanese economy (which became the first

of ‘three arrows’ in the ‘Abenomics’ strategy). Just as in Italy, Japan has steadily

improved its primary balance since 2009 and benefited from a declining interest rate-

growth differential (see p. 9). Still, outright debt reduction remained elusive, as

structural reform (another arrow) has largely disappointed. The biggest success on that

front has probably been higher female labour force participation, but there remains

severe discrimination against women, preventing them from getting higher paying jobs.

Lower borrowing costs and German

fiscal consolidation helped stabilising

euro area debt pile post GFC

Source: European Commission, Macrobond

Financial, Danske Bank

US primary deficits too high to

stabilise debt ratio

Source: European Commission, Macrobond

Financial, Danske Bank

4 | 30 September 2020 https://research.danskebank.com

Research Global

Occasional attempts to quicken fiscal consolidation (i.e. through VAT hikes in 2014

and 2019) have ended up doing more harm than good, triggering sharp falls in

consumption and economic activity. However, while Japan is a prime example of the

difficulties presented by high public debt levels paired with low structural growth, debt

servicing costs (and roll-over risks) have remained low, thanks also to an aggressive

monetary easing strategy enacted by the Bank of Japan (the last arrow of ‘Abenomics’).

Since the introduction of yield-curve-control in 2016, the interest rate on 10-year

Japanese government bonds has fluctuated tightly around zero.

Act III. To tolerate or not, that is the question

As explained in our primer on sovereign debt dynamics in the Appendix below (p. 7), the

interest rate-growth differential is a key variable that distinguishes sustainable debt

levels from unsustainable ones. Even before the coronavirus crisis hit and central banks

across the globe stepped up their efforts to ease monetary conditions and lower interest rate

levels (be it with conventional or unconventional tools), the interest rate-growth differential

had turned negative in most advanced economies. This has led to a resurface of the question

of ‘optimal’ public debt levels, with some economists arguing that the persistently negative

interest rate-growth differential makes high debt levels less of a worry, as higher debt can

be rolled over without significant higher costs (see also Olivier Blanchard’s work on Public

Debt and Low Interest Rates). Many European countries already took advantage of the

declining interest rate environment, extending the maturity on their outstanding debt.

Compared to 2014, Italy’s weighted average outstanding debt has increased by 0.5years to

just below 8y, while Spain has extended the equivalent by 1.4y.

There is reason to hope that a continued negative interest rate-growth differential will

prevent debt ratios from rising after the initial coronavirus fiscal splurge, as central

banks keep interest rates on government debt low through their asset purchase programmes.

In light of this continued financial repression by central banks, many governments could

just choose to live with higher debt levels as long as market access/funding does not become

a problem. The Japanese example has after all shown that a country can cope with high

debt burdens if it is complemented by easy monetary policy (=low rates) and a significant

share of the debt burden held by domestic citizens.

Our calculations show that if countries were to return to their 2019 primary balances

and assuming an unchanged interest-rate growth differential, most would experience

a gradual erosion of debt levels. An exception to this are the US and to some extent France

and Italy, which would need to increase their fiscal efforts (i.e. increase primary balances)

at current interest rate levels to stabilise debt (see table 2 p.7).

One drawback of this tolerance strategy is that it only allows for small primary

deficits. Large scale fiscal plans would need to be put on ice for a significant number of

years, which could hurt investments and potential growth. Some countries, especially in

Europe, might find this a hard bargain, not least due to larger health care and elderly care

spending and generally a larger role of the state after the coronavirus crisis. The pressure

on primary deficits could maybe be eased by exploring new revenue streams, such as

carbon and digital taxes that are already planned in some countries. However, the overall

issue remains that debt erosion through growth over time is a drawn out and slow process

that crucially relies on continued low interest rates for the near future or raising growth

prospects through structural reforms. However, interest rates might not stay low relative to

GDP growth: this could be due to declining trend growth on the back of public and private

underinvestment, a change in monetary policy in a more hawkish direction and/or investors

becoming nervous about the lack of fiscal consolidation eventually leading to higher risk

premia. Even more troubling would be the case were yields jump due to an erosion of

Interest rate-growth differential has

turned negative for many advanced

economies

Source: European Commission, Macrobond

Financial, Danske Bank

Weighted maturity of outstanding

government bonds has increased

Source: DMOs, Bloomberg, Danske Bank

France, Italy and US need to undertake

further fiscal consolidation to stabilise

debt

Source: European Commission, Macrobond

Financial, Danske Bank

Most countries’ debt dynamics would

cope with moderately higher interest

rates

Source: European Commission, Macrobond

Financial, Danske Bank

13.0

13.5

14.0

14.5

15.0

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Spain Italy US UK, rhs

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

DE FR IT ES EA19 US JP UK

Primary balance (% of GDP)

Actual primary balance

Required primary balance for stable debt ratio

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

DE FR IT ES EA19 US JP UK

Nominal interest rate

Actual i Required i for stable debt ratio

5 | 30 September 2020 https://research.danskebank.com

Research Global

central bank independence and fading belief in central banks’ inflation fighting

commitment.

The strategy of financial repression is not without costs, as central bankers might

increasingly find their hands tied by financial markets, as any attempts to exit

accommodative monetary policies trigger renewed spikes in nominal yields and fears about

debt sustainability. Furthermore, a gradual transfer of wealth from savers to borrowers will

ultimately be the consequence. Over time, this could stoke resistance in fiscally

‘responsible’ countries like Germany or the Nordics with large private savings.

The US experience with financial repression in the form of yield curve control (YCC)

after the Second World War also provides some cautionary lessons. The Fed adopted

YCC in April 1942 to support war financing, agreeing to cap the Treasury bill yield at

0.375% and the long-term government bond yield at 2.5%. From March 1942 to August

1945, the Fed bought USD20bn worth of Treasury securities (10% of total issued). When

the war was over and the economy rebounded, inflation did as well. This started a conflict

between the Fed, which wanted to raise short-term rates to combat high inflation, and the

Treasury, which wanted to maintain low Treasury yields. Eventually, the YCC policy was

abandoned in February 1951, but the Fed’s experience in the 1940s and 50s illustrates the

risks fiscal dominance can have to central bank independence.

Hence, counting on the interest rate-growth differential to stay negative can be a

dangerous strategy and especially highly indebted countries such as Italy and Japan will

be susceptible to a rise in interest rates as the degree of fiscal effort required is rising in

step with the debt stock, even if it remains far out in the future (see table 1 p.7). After all,

it is the marginal interest cost, rather than the average interest cost, that typically poses

rollover challenges to highly indebted governments and triggers a financial crisis.

Act IV. Of inflation, austerity and other unattractive options

Countries that cannot rely on a negative interest rate-growth differential need to find

other ways to bring debt levels on a sustainable path, through either inflating away

their debt pile or adopting fiscal austerity. As a last resort, countries might also choose

to default on part of their debt obligations. But punitive costs in terms of loss of market

access make this approach usually only viable in times of severe economic stress and

coinciding banking or currency crises.

Eroding debt through higher inflation might also turn out to be easier said than done

for many governments. Central banks in advanced economies have struggled to meet their

inflation targets even before the coronavirus crisis hit and inflation has generally played a

limited role in determining the fortunes of sovereign debt over the past 20 years. Although

the anti-inflationary effects from the coronavirus crisis will likely maintain the upper hand

in the near term, the long-term inflation consequences of the crisis are more ambiguous and

the combination of supply side constraints, aggressive monetary stimulus and fiscal

dominance taking over might over time lead to higher inflation rates in a post-COVID-19

world. However, even if governments’ push for higher inflation were to succeed, it is not a

given that the intended debt reduction would materialise. High inflation imposes a range of

other costs on the economy and in connection with the sovereign debt dynamics the most

punitive one is in the form of rising interest rates and thereby borrowing costs to roll over

the debt. Should bond yields rise by more than inflation, this could even end up raising the

debt burden gradually. There might be reason to believe that markets have grown immune

to inflation spikes when coming from low inflation episodes and new monetary strategies

such as the Fed’s adoption of average inflation targeting will likely ensure that interest rates

are kept in check even as inflation rises. However, the strategy of inflating away one’s debt

Central banks have struggled to meet

their inflation targets

Source: Macrobond Financial, Danske Bank

Bond yields have become immune to

inflation spikes

Source: Macrobond Financial, Danske Bank

6 | 30 September 2020 https://research.danskebank.com

Research Global

worries remains a two-edged sword and importantly requires a pliable central bank as

accomplice.

For governments that cannot rely on central bankers’ silent support to raise inflation

or which are otherwise constrained by adverse market reactions to such a move, fiscal

austerity remains the only alternative. Following the dire economic and societal

consequences of the fiscal austerity preached during the Eurozone crisis, the intellectual

tide has turned against this strategy though. Policy makers have also grown more tolerant

of higher public debt levels following the GFC, aware that the political backlash from

stringent austerity measures could do more harm than good. The general trend towards a

larger role of the state following the coronavirus crisis also makes it seem unlikely to us

that many governments will adopt outright fiscal austerity to grapple with their post-

coronavirus debt woes.

Act V. Walking a tightrope

We think it is important that governments find a way to make credible commitments

to sustainable fiscal policies once their economies have returned to full employment

in a post-COVID-19 world. Failure to do so could threaten not only confidence in

government finances but also future economic performance and will leave less room for

manoeuvre in a future crisis. One ‘easy’ way to do this could be through the adoption of

national fiscal rules, such as Germany’s debt brake, to strengthen incentives for anti-

cyclical fiscal policies and maintain markets’ trust. Another route could be in the form of

strengthening efforts to lifting potential growth, which is also an important aspect in the

new EU recovery fund, with grant disbursements linked to countries’ national reform plans.

We expect policymakers to take a very cautious approach to fiscal consolidation and

exiting from monetary policy support in the coming years even as the global economy

recovers. First, the recovery will likely continue to be fragile and lessons from the GFC

were that upfront fiscal austerity and central bank balance sheet reduction risk undermining

a nascent recovery. That said, governments should prepare for the possibility of an eventual

change of the global interest rate environment, even if it remains a low probability event –

a lesson amply taught by the 2020 coronavirus pandemic.

In Europe, we see greater political and market acceptance of higher debt burdens,

leading many countries to choose to live with permanently higher debt burdens. The

EU Commission confirmed that budget rules will remain suspended in 2021 due to the

exceptional crisis and even thereafter will likely undergo changes with the Commission’s

renewed push to integrate more flexibility into EU fiscal rules as has already been

recommended by the European Fiscal Board. Italian and French public finances seem most

vulnerable to an unsustainable trajectory in a post-coronavirus world. However, we still see

the risk of a debt crisis in e.g. Italy (potentially triggered by rating downgrades) as low due

to the ECB’s monetary lifeline (we expect gradual ECB balance sheet normalisation to start

at the very earliest in 2023 and more likely in 2024-2025). With regard to Italy, the biggest

risk is if the ECB is forced to tighten policy prematurely due to an unexpected surge in

inflation. Germany and some ‘frugal’ countries like Austria and the Netherlands will be the

first to restart discussions about fiscal consolidation (maybe as early as 2022), but even

Germany does not foresee a return to its balanced budget (‘Schwarze Null’) policy from

pre-corona times in its fiscal plans until 2024.

Likewise in the US, both political parties seem to accept higher public debt and we

think fiscal consolidation will be limited in the next couple of years. The difference will

be more about the composition of the US budget, where a Biden administration may target

higher income taxes for wealthy people to finance higher social spending (see also

Research US - Election dominated by COVID-19 and Fed policy, 7 September 2020).

Central banks will take cautious

approach to exiting support

programmes

Source: Macrobond Financial, Danske Bank

7 | 30 September 2020 https://research.danskebank.com

Research Global

Appendix

A primer on sovereign debt dynamics

In general, the change in the debt to GDP ratio can be explained by the difference

between the nominal interest rate and GDP growth (the so called ‘snowball effect’),

the primary balance (i.e. budget balance excluding interest payments) and other stock-

flow adjustments (comprising factors that affect debt but are not included in the budget

balance, such as acquisitions or sales of financial assets).

Especially the difference between the average interest rate governments’ pay on their

debt and the nominal GDP growth rate is a key variable for the public debt dynamics.

If the interest rate-growth differential (i-g) is positive, a primary surplus is needed to

stabilise or reduce the debt-to-GDP ratio. The higher the initial debt level, the higher

the primary surplus will need to be. Conversely, a persistently negative interest rate-

growth spread would allow debt ratios to come down even in the presence of (small)

primary budget deficits.

Solving for the primary balance, we can derive the debt sustainability condition. To

stabilise the debt to GDP ratio, the primary balance has to be at least as large as the

stock of outstanding debt times the interest rate-growth differential divided by the

growth rate. A different way to interpret this condition is to see the right-hand side of

the equation as the market risk premium on the outstanding debt. As long as the

primary balance is sufficient to cover this risk premium, debt remains in check. With

a smaller balance, the debt ratio rises, eventually leading to default or fiscal dominance

and inflation.

Table 2. US, France and Italy need to undertake further fiscal consolidation to stabilise debt

i: Implicit interest rate on public debt g: nominal GDP growth rate

2019 values taken for i, g and primary balance. 2020 Commission forecasts taken for debt to GDP ratio. Red cell indicates that a fiscal effort is required to increase

primary balance or actual interest rate is too high to stabilise debt.

Source: European Commission, Macrobond Financial, Danske Bank

Actual i g i-gDebt to

GDP ratio

Actual primary balance

Required primary

balance for stable debt

ratio

Change required in primary balance to

stabilize debt

Required i for stable debt

ratio

Change required in i to

stabilize debt

DE 1.3% 2.7% -1.4% 76% 2.3% -1.0% -3.3% 5.8% 4.5

FR 1.5% 2.8% -1.3% 117% -1.6% -1.5% 0.1% 1.4% -0.1

IT 2.5% 1.2% 1.3% 159% 1.7% 2.1% 0.3% 2.3% -0.2

ES 2.4% 3.6% -1.2% 116% -0.5% -1.3% -0.8% 3.1% 0.7

EA19 1.9% 3.0% -1.1% 103% 1.0% -1.1% -2.1% 4.0% 2.1

US 3.7% 4.1% -0.4% 136% -3.3% -0.5% 2.8% 1.6% -2.2

JP 0.7% 1.2% -0.6% 254% -0.8% -1.5% -0.7% 0.9% 0.3

UK 2.6% 3.3% -0.7% 102% 0.1% -0.7% -0.8% 3.4% 0.8

Table 1. Steady-state primary balance

(% of GDP) associated with different

debt ratios and market risk premiums

Source: Danske Bank *g assumed at 3%

Debt to GDP ratio

100% 150% 200% 250%

-3.0% -2.9% -4.4% -5.8% -7.3%

-2.0% -1.9% -2.9% -3.9% -4.9%

-1.0% -1.0% -1.5% -1.9% -2.4%

0.0% 0.0% 0.0% 0.0% 0.0%

1.0% 1.0% 1.5% 1.9% 2.4%

2.0% 1.9% 2.9% 3.9% 4.9%

3.0% 2.9% 4.4% 5.8% 7.3%

Market risk

premium (i-g)*

𝐷𝑡 − 𝐷𝑡−1 = (𝑖 − 𝑔)

(1 + 𝑔)𝐷𝑡−1 − 𝑝𝑏

𝑝𝑏 ≥(𝑖 − 𝑔)

(1 + 𝑔)𝐷𝑡−1

8 | 30 September 2020 https://research.danskebank.com

Research Global

Historical public debt dynamics Germany

Historical public debt dynamics France

Source: European Commission, Macrobond Financial, Danske Bank Source: European Commission, Macrobond Financial, Danske Bank

Historical public debt dynamics Italy

Historical public debt dynamics Spain

Source: European Commission, Macrobond Financial, Danske Bank Source: European Commission, Macrobond Financial, Danske Bank

9 | 30 September 2020 https://research.danskebank.com

Research Global

Historical public debt dynamics UK

Historical public debt dynamics Japan

Source: European Commission, Macrobond Financial, Danske Bank Source: European Commission, Macrobond Financial, Danske Bank

10 | 30 September 2020 https://research.danskebank.com

Research Global

Disclosures This research report has been prepared by Danske Bank A/S (‘Danske Bank’). The authors of this research report

are Aila Mihr (Senior Analyst), Piet P. H. Christiansen (Chief ECB Strategist), Mikael Olai Milhøj (Senior Analyst)

and Bjørn Tangaa Sillemann (Analyst).

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in the research report.

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Report completed: 29 September 2020, 13:36 CEST

Report first disseminated: 30 September 2020, 06:00 CEST