Speakers
Session overview
Objectives
As public debt reaches historic levels across advanced economies and borrowing conditions become less favourable, the key challenge is to understand why similar debt ratios can entail very different levels of vulnerability and what could trigger a shift from market tolerance to abrupt sovereign repricing.
The session will first examine the factors that determine sovereign debt sustainability beyond headline debt-to-GDP ratios. Participants will compare highly indebted euro-area sovereigns with other major advanced economies, notably the United States and Japan, and discuss how monetary sovereignty, creditor structure, r–g dynamics, fiscal capacity, growth, financing needs and political capacity to adjust explain why similar debt levels may entail different risks.
The session will then explore the behaviour of sovereign debt markets, assessing whether current market pricing still reflects underlying fiscal fundamentals, which indicators could signal a regime shift, and how the interaction of ECB backstops, fiscal rules and market discipline affects incentives for timely fiscal adjustment.
Finally, the session will identify the vulnerabilities and institutional weaknesses that could turn deteriorating debt dynamics into a market event. It will examine which sovereigns appear most exposed to a major repricing in the years ahead and the criteria underpinning that assessment.
Points of discussion
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To what extent are highly indebted euro-area sovereigns structurally more fragile than similarly or even more indebted advanced economies such as the United States and Japan? Which criteria allows one to discriminate between highly indebted countries?
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Why do sovereign debt markets remain so tolerant of deteriorating debt dynamics, and what thresholds, catalysts or shocks could trigger a sudden repricing?