Swiss Finance Minister Karin Keller-Sutter has expressed grave concern about rising debt levels in the United States and Europe, describing them as a “time bomb” that could threaten global financial stability.
In an interview with the Swiss newspaper Blick, she pointed out that Switzerland’s financial discipline has helped it deal with recent economic challenges such as the Corona pandemic and Russia’s invasion of Ukraine, while countries such as the United States and France face huge debt burdens that hinder their ability to take effective action.
Reuters quoted Keller-Sutter as confirming that these countries have become so burdened with debt that it is difficult for them to act. She focused in particular on the United States, noting that the rapid decline in stock markets in early August was a clear “warning” indicating the escalation of investors’ fears of a recession.
The Swiss minister warned that these high levels of debt pose a major risk to the stability of global markets, and have a negative impact on her country.
Global debt a growing concern
These concerns come amid the worsening global debt crisis. According to the International Monetary Fund, global debt reached a historic $315 trillion in May of this year, a level roughly equivalent to 3.7 times the global gross domestic product, according to CNBC.
These debts have been exacerbated by unprecedented borrowing during the COVID-19 pandemic, as governments and companies resorted to borrowing to mitigate the economic impact of lockdowns and restrictions.
In the United States, federal debt has risen to more than $35.2 trillion, a 46% increase in just five years. The government debt-to-GDP ratio now exceeds 129%, indicating a significant level of concern about the size of the debt relative to the size of the economy.
The situation is no less serious in Europe, where debt levels have risen in countries such as France, where national debt exceeded 112.3% of GDP, as estimated by the International Monetary Fund earlier this year.
Many European countries are struggling to control their budget deficits, despite increasing pressure to support social programs and defense spending amid global uncertainty.
Swiss stability
In light of rising global debt, Keller-Sutter stressed the importance of Switzerland’s fiscal discipline, which has helped it maintain stability even in difficult times.
She stressed – according to Reuters – that this disciplined approach is necessary to protect the Swiss financial system from the risks caused by excessive borrowing in other parts of the world.
Keller-Sutter also discussed the government’s recent proposal to require UBS to hold more capital after its takeover of Credit Suisse, arguing that the move was necessary to ensure Switzerland remained protected from a potential banking crisis.
