ESM hosts seminar on Debt Sustainability

The ESM will hold a high-level seminar on April 20-21, 2021 to discuss key issues in debt sustainability analysis in light of the changing economic and policy environment, including due to Covid-19. In particular, interest rates are likely to stay low for an extended period of time, the fiscal and monetary policy response to Covid-19 has been very large and effective, potential growth has been weak and may be at risk of further scarring from Covid-19, and there are looming long-term challenges like ageing and climate change. These developments are changing how policy makers, markets and academia think about debt sustainability. On one hand, debt levels that previously would have raised major doubts about sustainability now appear sustainable under reasonable baseline assumptions. On the other hand, higher financing needs expose economies to higher risks from shocks, and weaker growth prospects as well as climate challenges pose longer-term threats. These issues are particularly relevant as Europe is searching a new post-Pandemic framework for coordinating fiscal policies, and the future relationship between fiscal and monetary policies is in debate. We will discuss these issues with a high-level group of policy practitioners, academics, and market investors.