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Monetary experts warn against high debt

March 20th, 2021

Two chief economists of the Hungarian National Bank dismiss the suggestion, broadly held among left-wing US economists, that governments have no reason to worry about high levels of public debt.

On Portfolio, National Bank advisers György Szapáry and Zsuzsanna Hardi caution against abandoning efforts to lower public debt. The two economists acknowledge that governments need to print money in order to stimulate the economy during the coronavirus pandemic. Szapáry and Hardi, however, do not agree with suggestions that governments have no reason to worry over high debt levels, as interest rates are expected to remain low. They think that the US and Japan may have indeed little to worry about, even if their national debts hit new highs, but slower growth and higher interest rates may in future severely impact smaller and more vulnerable economies. In conclusion, Szapáry and Hardi call on governments to keep deficits under control, and do their best to lower public debt once the pandemic is over and the national economies emerge from the crisis.

In a separate piece published after Szapáry’s and Hardi’s article, National Bank President György Matolcsy wrote that emerging markets cannot be relaxed over high debt. Mr Matolcsy agreed with US economist Paul Krugman that the US can afford even higher debt levels, but added that smaller and more vulnerable economies cannot follow the same course.

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