Author: Tina Aridas, Valentina Pasquali
Project Coordinator: Alessandro Magno, Denise Bedell

Public debt is the total amount of money owed by the government to creditors. It is usually presented as a percent of gross domestic product (GDP). Because of the global financial crisis and the euro zone sovereign debt crisis, Advanced Economies have followed a particularly dangerous trajectory of indebtedness in recent years. Total debt for OECD countries was at 74.2% of total OECD GDP in 2007 and is now growing to 112.5% in 2014 (estimated). Individual countries within the OECD ranged in 2012 from a low of 14.5% of debt to GDP in Estonia to 224.3% in Japan.

Data is from the OECD Economic Outlook No. 92 (database) as of December 2012.

Public Debt as a % of GDP in OECD Countries, 2007-2014

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* Information on data for Israel http://oe.cd/israel-disclaimer

Public debt, also called “government debt” or “national debt,” includes money owed by the government to creditors within the country (domestic, or internal debt) as well as to international creditors (foreign, or external debt).

There are two standard ways to measure the extent of government debt: gross financial liabilities as a percent of GDP or net financial liabilities as a percent of GDP. General government gross debt refers to the short- and long-term debt of all institutions in the general government sector (some definitions of national debt include such government liabilities as future pension payments and payments for goods and services the government has contracted but not yet paid, and other definitions do not). General government net debt refers to gross debt minus all financial assets.

The differences between gross debt and net debt is very large for some countries and some analysts believe that net debt is a more appropriate measure of the debt situation of a particular country. However, since not all governments include the same type of financial assets in their calculations, the definition of net debt varies widely and makes country-to-country comparisons difficult. Therefore, gross debt as a percentage of GDP is the most commonly used government debt ratio and is the way that the OECD measures debt.

The financial crisis that began in late 2007, with its mix of liquidity crunch, decreased tax revenues, huge economic stimulus programs, recapitalizations of banks and so on and so forth, led to a dramatic increase in the public debt for most advanced economies. Public debt as a percent of GDP in OECD countries as a whole went from hovering around 70% throughout the 1990s to almost 110% in 2012. It is now projected to grow to 112.5% of GDP by 2014, possibly rising even higher in the following years. This trend is visible not only in countries with a history of debt problems - such as Japan, Italy, Belgium and Greece - but also in countries where it was relatively low before the crisis - such as the US, UK, France, Portugal and Ireland.

Many analysts see this high level of debt as being unsustainable in many countries, with the euro zone in the eye of the storm. Indeed, throughout 2010, 2011 and even 2012 speculators were betting on defaults by Greece, and possibly Italy, Spain and Portugal. Some countries are in a better position, like France and Germany. However, even here, rating agencies are tweaking with credit ratings and threatening downgrades, bolstering fears that the European Union could collapse under the weight of its members’ debt. To respond to this emergency, governments across Europe have implemented painful austerity measures, which are now causing enormous political dissatisfaction, instability and growing protests all over the currency union.

William R. Cline, senior fellow at the Peterson Institute for International Economics in Washington D.C., discusses debt sustainability of key euro area economies in this video from January 2013.

Sovereign Debt in the Euro Area

Public debt in Greece has almost doubled, from 115.2% of GDP in 2007 to a projected 200% of GDP in 2014. Similarly, Portugal’s debt is going from 75% of GDP in 2007 to an estimated 134.6% in 2014 and Spain’s from 42% six years ago to 105% next year. In Italy, indebtedness has not risen as fast but it is on a clear uphill slope, going from 112.4% in 2007 to 131.4% in 2014.

Outside of the euro zone, Japan is a country with a long history of sky-high indebtedness. Debt as a percent of GDP broke through the 100% mark in 1997 and has risen steadily since then. It surpassed 200% in 2011 and is headed toward 230% of GDP in 2014. However, in contrast to the US’ for example, most of Japan’s debt has been financed by Japanese investors. Some analysts see the percent of foreign-owned debt as more threatening to an economy’s longer-term health than total debt.

Among OECD countries, Estonia seems to have its fiscal house in order, with debt projected to be less than 16% in 2014. Australia (with debt at 28% of GDP in 2014), Luxembourg (34.4%,) and Korea (36.7%) are also doing much better than average.

According to the IMF, outside of the OECD, a number of countries face heavy debt burden in the near future, such as Buthan (an estimated 100% of GDP in 2014,) Eritrea (123%,) Grenada (112%,) Jamaica (139%,) Lebanon (136%,) Maldives (122%,) Singapore (101%,) Saint Kitts and Nevis (133%,) Sudan (115%,) and the United States (114%.)


Data is from the World Economic Outlook of the International Monetary Fun, October 2012. Figures diverge slightly from those by the OECD used in the chart above.

Public Debt as a % of GDP in Countries Around the World, 2007-2014

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