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Which countries have the highest public debt? Find out the ranking and where Italy ranks.

Public debt is one parameter that describes a country’s economic situation. It is often mentioned everywhere, with another measure, GDP, which indicates a state’s total productive assets.

But which are the most indebted states, and thus, which is the ranking of the countries with the highest public debt?

Public debt: a problem to be tackled

The ranking of countries by public debt has changed since the COVID-19 pandemic, not so much by the order of the states in the ranking but by the amount of money they owe their creditors. In 2028, according to the International Monetary Fund (IMF), the global debt-to-GDP ratio will reach 100%. This indicator, usually used to analyse the economic situation of an individual state, measures the amount of debt concerning the Gross Domestic Product (GDP), i.e. the total productive assets of a state, over a year.

If the low ratio, GDP is sufficient to repay the annual debt. If, on the other hand, the ratio represents a large gap between debt and GDP, it will mean that production is not enough to repay the debts, and more will have to be demanded, increasing the ratio even further.

The situation is even more severe if we consider the quantitative tightening policies all central Western governments implement to combat inflation. Rising interest rates contribute to increasing government debt costs. If that were not enough, the outbreak of conflict in the Middle East could increase energy and fuel costs and, consequently, government spending. So, what is the ranking of the countries with the highest public debt?

The ranking of the most indebted countries

The countries with the highest public debt are ranked using the debt-to-GDP ratio. The nominal value of this measure taken ‘alone ‘needs to provide information on the real incidence of a state’s debts.

1. Japan (258.2%)

The country with the highest debt-to-GDP ratio is Japan. The causes of the country’s high debt are to be found in the housing bubble that burst in the 1990s.

2. Greece (166%)

Greece’s avoided default in 2009 is now a distant memory; the country has certainly improved in recent years. In the second quarter of 2023, it was the second fastest-growing country in Europe.

3. Sudan (151.1%)

Third in the ranking of countries in terms of public debt is Sudan, which has been severely affected by an economic crisis caused by internal conflicts. This has resulted in policies of international isolation negatively influenced by corruption.

4. Eritrea (146.3%)

Eritrea is a dictatorship headed by unelected President Isaias Afewerki. In the African state, the authoritarian government has implemented laws that severely restrict civil and political rights. In addition, it imposes long-term compulsory military and civil service, which forces many citizens to flee.

5. Italy (141.7%)

Our country ranks fifth among the most indebted countries. The Italian public debt reached a new all-time high in February 2023 and, after a slight decline in August, has been rising again since September.

6. Laos (123%)

The high ratio of public debt to GDP in Laos is mainly caused by the country’s structural challenges of macroeconomic instability. Despite this, however, the situation could improve as tourism in the country is expected to pick up again.

7. USA (122.2%)

Seventh on the list of the most indebted countries is the United States, which, like Italy, is pursuing quantitative tightening policies to combat inflation. One of the weak points of these policies is debt. As interest rates rise, so do the states’ liabilities.

Now that you know the ranking of the most indebted countries, you can delve deeper by reading our dedicated Academy article. This starts with a simple definition and then deals with the history of Italy’s public debt.

ECB meeting April 2024: interest rates unchanged

The recent drop in inflation rates in France and Italy has ignited a lively debate about possible moves by the European Central Bank (ECB), with much attention focused on the At the last ECB meeting in April 2024, the Governing Council decided to keep the three key interest rates unchanged.

This decision came despite the recent drop in inflation rates in France and Italy. In fact, the picture in March sparked a lively debate on possible moves by the European Central Bank, pointing to the possibility of an early rate cut. This discussion comes against a backdrop of Europe actively trying to balance economic growth with controlling inflation, a topic of considerable interest to investors, policy-makers, and consumers.

The European panorama

The eurozone witnessed a significant reduction in inflation in 20 nations, which fell to 2.4% in March. This result exceeded analysts’ expectations, who had forecast a stable inflation rate of 2.6%  

This is consistent with the inflation trend, which has shown a steady decline since its peak of 10.6% in October 2022, driven by pandemic disruptions and geopolitical tensions, particularly Russia’s invasion of Ukraine. 

A further decline is therefore encouraging and marks a moment of optimism, which the ECB meeting in April 2024 confirmed. 

Indeed, the Council pointed out that most measures of core inflation are showing signs of easing, with wage growth moderating gradually and companies beginning to absorb some of the increase in labour costs into their profits.

The demand-pulling effects of previous interest rate hikes, together with tight financing conditions, are helping to moderate inflation. Nevertheless, domestic price pressures remain strong, particularly in the service sector, keeping service price inflation at high levels.

Falling inflation in France

In France, inflation slowed to its lowest level since July 2021, with consumer price growth slowing to 2.3% in March from 3.2% in February, according to the national statistics agency. This was well below economists’ forecasts, which expected a figure of 2.8%, signalling a general slowdown in price increases. In particular:

• services inflation dropped to 3%
• that of energy at 3.4% 
• and a significant decrease in food inflation to 1.7 per cent, with fresh food prices falling by 3.9 per cent year-on-year.

Month-on-month inflation data further confirmed the trend, slowing from 0.9% to 0.3%, indicating a considerable easing of inflationary pressures in the eurozone’s second-largest economy.

Falling inflation in Italy

Italy also reported a lower-than-expected inflation rate for March, with consumer prices rising by 1.3% year-on-year, against forecasts of 1.5%. This moderation was attributed to the end of seasonal clothing sales and price increases in transport services, along with a slowdown in falling energy costs.

ECB rate cut decisions

The interest rates on the main refinancing instruments, the marginal lending facility and deposits will remain fixed at 4.50 %, 4.75 % and 4.00 % respectively. 

Furthermore, according to statements given at the press conference following the meeting, the Council believes that inflation levels in the coming months will still fluctuate around current levels. The decline in inflation will not be linear and will therefore have to be assessed on a case-by-case basis. In all likelihood, the target level of 2% will only be reached next year. 

François Villeroy de Galhau, Governor of the Bank of France, hinted at the possibility of a rate cut in June, provided inflation continues to fall faster than expected and the economy remains stagnant. He emphasised the importance of not overburdening economic activity by maintaining a tight monetary policy for a prolonged period.

Speaking at a financial event in Barcelona, Pablo Hernández de Cos outlined a scenario where June could see the start of interest rate cuts by the ECB. As Governor of the Bank of Spain, De Cos’ outlook carries significant weight, highlighting a cautious but optimistic approach to the Eurozone economy.

Wage growth and inflation

Despite encouraging signs of cooling inflation, ECB monetary policymakers remain

Despite encouraging signs of cooling inflation, the ECB’s monetary policymakers remain cautious, particularly as wage growth gradually moderates. Companies are starting to absorb some of the increase in labour costs with their profit margins. 

With service sector inflation down only slightly to an annual pace of 3.9% in February, the central bank is taking a measured approach, probably waiting until June to reassess wage pressures and their potential to bring inflation closer to the target.

Market expectations and ECB position

Analysts believe that the biggest complication could come if the US Federal Reserve delays its policy easing to keep up the fight against inflation. For this reason, they believe the ECB will not cut rates before its big sister. 

To the supporters of this interpretation, ECB President Christine Lagarde replies: ‘We are data-dependent, not Fed-dependent’. She adds, ‘We do not speculate what other central banks might do. (…) Different factors drive inflation in the US and the Eurozone. (…) It cannot be assumed that Eurozone inflation will mirror US inflation.”

After the ECB decision, money markets were pricing about a 70% chance of a 25 basis point rate cut in June, compared to about an 80% chance earlier on Thursday.

Experts such as Carsten Brzeski, global head of macro at ING, suggest that the March inflation data, combined with upcoming information on wage growth and ECB staff forecasts for GDP and inflation, are tilting the narrative towards a first rate cut in June. Kamil Kovar of Moody’s Analytics interprets the latest data as a significant step towards defeating inflation, advocating up to five rate cuts this year.

Perspectives

The ECB’s decision to keep interest rates unchanged and to continue with a measured monetary policy reflects a careful assessment of current economic conditions and the inflation outlook. By committing to a flexible and data-driven approach, the ECB underlines its determination to ensure lasting price stability by balancing the needs for economic growth with its responsibility to keep inflation under control. The ECB’s future moves.will be awaited with great interest, as Europe navigates through complex economic challenges, seeking to ensure a sustainable recovery and long-term stability.

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On 11 April 2024, the European Central Bank (ECB) is set to make a decision that could affect the economy across Europe. Recent data showing a surprising drop in inflation rates in France and Italy are growing speculation about a potential interest rate cut. This article explains the basics of the ECB’s role, inflation dynamics, and the possible impacts of upcoming policy decisions.

The European Central Bank explained

The ECB guards monetary stability for the Eurozone countries, ensuring that the euro remains a stable and reliable currency. Its main tool for achieving this goal is manipulating interest rates, a lever that directly influences economic activity across the continent.

The importance of ECB decisions

The ECB’s decisions have repercussions for the entire economy, from the expansion of companies that borrow to invest in their businesses to interest rates on personal savings accounts or mortgages. 

The adjustment of interest rates can, in fact, stimulate economic growth by making borrowing cheaper or, on the contrary, cool an overheated economy. In other words, the health of the economy, reflected in employment rates, business growth, and consumption, is directly influenced by ECB policies.

ECB impact on markets 

The ECB’s decisions affect not only the traditional economy but also the investment world, including cryptocurrencies. 

When the ECB changes interest rates, it affects how people invest their money. If interest rates are low, it costs less to borrow money, which may make investing in stocks or real estate more attractive. On the other hand, if rates rise, keeping one’s savings in bonds with lower risk rates may become cheaper.

Although cryptocurrencies belong to a market that is considered more volatile, they are not insulated from the effects of these policies. The ECB’s decisions may influence investors’ risk appetite: in times of low rates, some may seek higher returns in cryptocurrencies, while in times of higher rates, they may prefer investment options considered safer.

The element that most influence interest rate decisions is inflation. 

The role of inflation and its effects

Inflation measures how much more expensive goods and services have become in a given period. A certain level of inflation is normal and even desired in a healthy economy, as it indicates growth. However, too high or too low inflation can signal trouble, affecting everything from your grocery bill to your savings.

High inflation means your money is not worth as much as before, affecting how households plan their budgets and the future. To manage inflation, central banks such as the ECB adjust interest rates. Lowering rates can encourage spending and investment by making borrowing cheaper while raising rates can help cool a sluggish economy.

How to monitor ECB decisions 

To monitor these dynamics, you can use Young Platform. As an app and on the web, Young Platform offers free membership and publishes updates that allow you to monitor the impact of economic news on cryptocurrency prices in real-time. Additionally, on the Young Platform website, all content, news, and in-depth articles are free, providing a valuable resource for staying informed.

Another useful strategy is to mark the dates of upcoming ECB meetings on your calendar or follow live press conferences. This allows you to be among the first to understand the ECB’s decisions and how they might affect the market, including cryptocurrency.

The current economic scene

Recently, there was a positive surprise for the Eurozone economy, including in countries such as Italy, France, and Germany. Inflation, i.e., as we have seen, how fast the prices of goods and services such as food, clothes and petrol rise, fell more than everyone expected in March 2024, to 2.4%. Experts thought it would remain at 2.6 per cent. The core inflation rate, which excludes volatile components such as energy, food, alcohol and tobacco, also decreased from 3.1 per cent to 2.9 per cent. This might seem like a small change, but it has great significance.

• France: inflation slowed down significantly, with declines in the prices of services, energy and food.
• Italy reported lower-than-expected inflation rates, following a similar trend to France.
• Germany has the largest economy of all the Eurozone countries and saw prices increase by only 2.2%, the slowest pace in three years. 

When inflation falls, it means that price increases slow down. For people, this might mean that the money they earn ‘lasts longer’ and that they notice fewer price increases when they shop daily. Inflation cooling in more than two major Eurozone economies has led to more speculation about the ECB’s next step.

What would an ECB rate cut signify?

Interest rates influence how much it costs to borrow money. When they are low, people and companies can borrow more easily to buy a house or invest in new projects.

Thus, if the ECB decided to lower short-term interest rates, it could make loans and mortgages cheaper, stimulating economic growth. However, for savers, this could mean lower returns on savings accounts.

Some numbers to watch out for 

Despite the good news, not all sectors are slowing down similarly. Inflation in services, such as restaurants and transport, remained more or less the same, showing that wages can still push up prices in some areas. The ECB needs to consider this carefully, as such an increase could result in a postponement of the interest rate cut.

The labour market 

While discussing inflation and interest rates, we have to consider another important factor for this picture: the labour market. In February 2024, the number of people out of work in the euro area was 6.5 per cent, slightly lower than last year. This means that, despite everything, people are finding jobs, which is a good sign for the economy. However, the forecast for March given by Istat is not the best, with a provisional 7.5% unemployment rate.

The difficult task of the ECB 

Not all Eurozone countries experience the same situations and have the same economic climate. This difference between countries is crucial for the ECB when considering interest rates. It has to ensure that whatever decisions it makes work not only for countries with inflation problems but also for those doing well. The ECB has the complicated task of keeping everything in balance without causing problems in any area.

Conclusion 

All of this affects us closely, from falling inflation to stable unemployment rates and differences between countries. It affects how much the things we buy cost, how easily companies can grow and, ultimately, how many people can find work. While we wait to see what the ECB decides, we can be sure its actions will directly impact our personaleconomy, investments, and jobs.

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Experts’ forecasts for the euro-dollar 2024 exchange rate: which currency will be stronger? 

What are the forecasts for the EUR/USD exchange rate in 2024? As always, experts in the currency market and beyond closely monitor the EUR/USD exchange rate. Every movement of the quotation is constantly analysed, as is the continuous strengthening and weakening of one currency against another. For this reason, and because of their interest in the pair, experts make their forecasts on the EUR/USD exchange rate every year. 

Euro-dollar exchange rate: forecast 2024

Before analysing the forecasts on the euro-dollar exchange rate, it is necessary to make a few theoretical clarifications. EUR/USD is the abbreviation for the euro-dollar exchange rate, i.e. the rate that indicates how many dollars are needed to buy one euro. In this currency pair, the euro is the ‘base currency’, and the dollar is the ‘quoted currency’. If, for example, the rate is 1.5, it means that $1.5 corresponds to 1 euro.

Forex investors study the euro-dollar exchange rate, generally used to calculate a currency’s strength. This metric is influenced by central bank monetary policies, such as interest rate rises, and macroeconomic conditions, such as inflation or the bond yield spread between the US and Germany. Specifically, when a central bank raises interest rates, money in circulation decreases, increasing its value.

What do the major investment banks’ forecasts on the euro-dollar exchange rate for 2024 tell us? In general, is the euro expected to continue gaining ground against the dollar, or will we see the opposite scenario?

If you are also interested in digital currencies, Young Platform allows you to check the Euro Bitcoin exchange rate and the rates of the best cryptos on the market. 

Morgan Stanley’s forecasts

According to Morgan Stanley analysts, unlike in 2023, USD will regain lost ground against EUR in 2024.

Their forecast on the euro-dollar exchange rate sees the pair reaching 1 in the coming months. Therefore, the euro’s descent that began at the end of November 2023 will not stop. 

Bank of America and ING

On the other hand, Bank of America (BoA) expects a still relatively strong euro in 2024. The exchange rate estimate is 1.10 and 1.15 in 2024. Several elements could alter these assumptions, but the main one is related to interest rates. BoA analysts think that the Fed’s rate cut, which will take place, again according to them, from June 2024 onwards, will undermine the strength of the dollar. The lower the rates, the more liquidity there should be in the markets, which would favour investments in riskier assets and a drop in demand for the US currency.   

JPMorgan

JPMorgan’s euro-dollar exchange rate forecast from October begins with the realization that the dollar could return strong in 2024 after the crash of 2022/2023.  

The main cause is the war in the Middle East and the possible increase in energy prices. JP Morgan’s forecast for 2024 has a precise price target: 1.00 in the first months of the year. This would translate into a 7% increase in the dollar’s value. 

ABN AMRO Bank

ABN AMRO Bank economists, on the other hand, raised their forecasts for the euro-dollar exchange rate. The bank expects the Federal Reserve and the ECB to start lowering interest rates with the arrival of the New Year. This hypothetical situation would not favour either currency. The exchange rate is expected to settle at 1.05 at the beginning of the year and reach a high of 1.10 in the final quarter.