Belfast Telegraph

High national debt a ‘threat to government finances’

By Donal O'Donovan

High levels of national debt are the main threat to government finances globally, rating agency Fitch has warned, saying governments and populations are also now less willing to commit to austerity to reign in borrowing.

Faster global growth means what the rating agency calls the ‘global sovereign credit cycle’ is likely to turn less negative in 2017 — meaning fewer nations run the risk of a default.

But Fitch said debt levels in both developed and emerging markets are a concern, especially if borrowing costs start to rise.

“The biggest constraint on ratings is high and still-rising government debt levels, evident in both developed and emerging markets, leaving sovereigns exposed to a change in the global interest rate environment,” James McCormack, global head of Sovereign and Supranational Ratings at Fitch, said.

The Republic’s national debt has surpassed €200bn (£178bn) for the first time in 2017, as the cost of almost a decade of budget deficits and bank bailouts has piled up.

Irish government borrowing costs remain at close to an all-time low, however, and the National Treasury Management Agency (NTMA) plans to raise €750m (£667m) in new bond debt today, at prices that imply an interest on 10-year borrowings of around 1% a year.

Meanwhile, the beginning of the Brexit negotiations with the European Union represents a material risk to the UK, Fitch also said.

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