Public finances worldwide: States are borrowing more and more money

dpa | According to a forecast by the industrialized countries organization OECD, the national debt of the leading economic nations will once again reach a record this year. This means that concerns in the financial world are also growing. What is particularly causing concern is the rapid increase in US national debt, which exceeded the $40 trillion mark (around €34.87 trillion) in August. But the USA is by no means alone.

Since 2007, the national debt of the 38 OECD countries has tripled: from 22.5 trillion US dollars in 2007 to 61 trillion dollars in 2025. A key reason lies in Washington: the US's liabilities have increased from 9 trillion to 40 trillion dollars during this period. On average, America's debt burden is increasing by over $6 billion every day, according to data from the US Treasury Department.

“The debt dynamics in the USA are worrying,” says Björn Griesbach, head of capital market and macroeconomic research at Allianz Investment Management, a subsidiary of the Munich DAX group. With assets under management of over 2 trillion euros, Allianz is one of the largest investors on the planet.

The U.S. budget deficit is expected to be around 5.7 percent of gross domestic product this year, Griesbach says, near historic highs outside of a recession. “If there were an economic downturn, the deficit would increase significantly again, a risk that similarly applies to France, Italy, Germany and Japan.”

However, the absolute numbers make the situation look more dramatic than it is. Because they do not take inflation or economic growth into account. Economists usually put national debt in relation to gross domestic product (GDP).

In this regard, the rise in US debt looks a little less scary. Since 2016, the US GDP has also grown from $19 to $32 trillion, as Griesbach says. “That helped the debt ratio only rise from 107 to 124 percent.”

In relation to GDP, Japan has been at the top worldwide for many years with a debt ratio of over 200 percent, according to the International Monetary Fund (IMF). “The development is indeed a global phenomenon,” says Allianz economist Katharina Utermöhl. “In addition to the USA, Japan, France and Germany are particularly worth mentioning.” At just under 65 percent, the Federal Republic's debt level is still low compared to global standards, but new debt is high.

Debt is growing particularly impressively in China: Measured against economic growth, national debt there has more than doubled within ten years, according to the IMF: from 50 to probably almost 107 percent of GDP at the end of this year. At the same time, private sector debt – excluding banks – rose to an extremely high ratio of 313 percent in 2025. China's export offensive is financed on credit, and many companies are in the red.

But how dangerous is this development? “There are no benchmarks for the major economies from which economists could determine when the level of debt really becomes problematic,” says Würzburg economist Peter Bofinger. “Japan is an example of a country that can live with a debt ratio of 200 percent or more for years.” The majority of the liquid assets generated by the debt are bought by the Japanese and also invested in Japan.

According to Bofinger, a problem arises when a country is in debt in a foreign currency or the money flows out of the country in question, the currency devalues ​​and inflation follows. “It would be a critical situation for the USA if global investors, who have previously considered the dollar to be a safe investment, became afraid,” says the scientist. “That’s the risk.” US bonds have previously been considered absolute security in the global financial system.

But there is an indication that confidence in the USA is by no means unshakable: In August, interest rates on ten-year US bonds rose to 5 percent, the highest level since 2007, the year before the global financial crisis. “The high interest rates on US government bonds show that the trees in the USA don’t grow to the sky either,” says Bofinger.

The fiscal dynamics are certainly worrying in some countries, says Henning Potstada, member of the management team at DWS. The Deutsche Bank asset manager is also one of the heavyweights in the financial market. However, the USA has structural advantages. Potstada mentions, among other things, the dollar as the global reserve currency, the high potential growth of the US economy and energy independence.

In addition, former problem children such as Italy, Spain and Greece have reduced their debt levels. The fiscal dynamics in the USA are worrying and improvement is difficult to see, says Potstada. “But there is still a long way to go before a global debt crisis.”

For most people around the world, their government's debt levels are an abstract matter with no connection to everyday life. If a major catastrophe is not to be feared in the near future, can ordinary citizens ultimately not care about developments?

No, because the consequences are very noticeable. Growing debt means rising interest payments. The governments then lack this money, be it for investments, housing or social benefits. According to calculations by the Ifo Institute, the federal government's interest payments will double from 50 billion to 100 billion euros per year by 2030.

Governments could cut spending and/or raise taxes, but both seem unpopular - although more and more people are in favor of higher inheritance or wealth taxes. A third solution remains, which is directly at the expense of citizens: increased inflation rates, which reduce the value of money and debts alike. “Significant fiscal savings or tax increases can hardly be expected in any country given upcoming elections and rising populism,” says Allianz economist Utermöhl. “So in the long term, inflating the debt away in one way or another seems to be the only solution.”