The fiscal austerity programs that are being implemented across Europe are self-defeating and will lead to higher debt by next year, a research group said.
Government debt as a share of gross domestic product will increase by an average of 5 percentage points as a result of budget squeezes across the continent, the National Institute of Economic and Social Research said today. Britain and every euro-area country except Ireland will see debt ratios rise, it said.
“In current circumstances, fiscal consolidation is indeed likely to be self-defeating,” the London-based group said in a statement. “As a result of the fiscal consolidation plans currently in train, debt ratios will be higher in 2013 rather than lower.”
The research follows a warning from the International Monetary Fund earlier this month that budget consolidation programs may cause a bigger-than-anticipated drag on economic growth.