Summary
- While the emerging and developing countries suffered no more than a heavy slowdown during this severe recession, the developed countries instead were hit extremely hard. This is reflected, among other things, in the financial health of their governments.
- Prior to the present crisis, the United States and the United Kingdom had the lowest gross financial debts among the G7 nations. However, these two countries registered the sharpest increases in this regard from 2007 to 2009, along with Japan.
- However, if we examine growth in net financial debt, an additional indicator of financial health, the U.S. government fares better compared with the United Kingdom, Japan and France.
- At a time when debt stabilization is an objective on the agenda of all of the G7 countries, we believe that the relatively low interest rate on the public debt and stronger economic growth in the United States will contribute to facilitate matters in this regard for U.S. authorities.
- According to our calculations, the adjustments necessary to stabilize the U.S. debt are smaller than those that Canada had to make in the early 1990s. Furthermore, we should not forget that the United States has the lowest tax revenues of the OECD countries, and this affords the government some room to manoeuvre.
- The next shock to hit the public finances of the developed countries will derive from the aging of the population. In this regard, the U.S. government will benefit from a population that is younger and aging to a lesser degree than elsewhere.
