IMF Warns That Sovereign Debt in Advanced Economies is Unsustainable
At a conference in Beijing, the International Monetary Fund’s first deputy managing director, John Lipsy, spoke with alarm over his forecast that average public debt to GDP ratios in all advanced economies would exceed 100 percent during 2011. Lipsky and the IMF issued a blunt warning; these ratios, set for continued expansion with public deficits spiraling out of control, are unsustainable and will lead to critical economic consequences. His views were in opposition to those who supported continued government deficits as vital for stimulating advanced economies, which continue to be plagued by low or negative growth.
The IMF official also said that current low interest rates on sovereign debt cannot be sustained for much longer. Higher interest rates are inevitable, Lipsky indicated. The IMF is clearly worried that a sovereign debt crisis of massive proportions is about to metastasize throughout all advanced economies, having already ravaged Greece and Ireland.
