Happy New Year and I hope everyone spent the evening in an enjoyable way.

 

As ’26 begins I would like to highlight some of the new published literature that has used our ICRG risk data to help shed light on some topics that night not get the most comprehensive  treatment by the mainstream press.

 

In a November article published by Bruegel, the independent European think tank,  the authors considered debt stabilization efforts in the EU, the UK, and the US. The idea was to use a few methodologies to estimate the probability of stabilizing the debt ratio over the medium term, and to estimate ‘ the fiscal reactions functions’ that measure the primary balance to the debt level.

 

The relevant finding is that the fiscal adjustment required to reach debt stabilizing primary balances several countries (notably France, Romania, the US and the UK) is quite high, adding that these countries must increase their primary fiscal balances by 5 percentage points of GDP.   This is instructive and a seemingly tall order.  Comibe this with some of our ICRG data on the factors supporting government (in)stability, and the outlook becomes even more nuanced.

 

Have a look when time permits.  Bruegel always publishes timely material. (https://www.jstor.org/stable/resrep73201?searchText=ICRG&searchUri=%2Faction%2FdoBasicSearch%3FQuery%3DICRG%26so%3Dnew&ab_segments=0%2Fbasic_search_gsv2%2Fcontrol&refreqid=fastly-default%3A0d338e7385cb9da21b0402a0f156f82a&seq=1)

 

Additionally, in a recent piece published in the Journal of Economic Perspectives, the authors take stock of EU sovereign debt risks in light of higher debt and fiscal fragmentation but better policies and integration. The work draws on our ICRG data as we’ll as that of the IMF’s World Economic Outlook, the European Commission AMECO, and the Bureau of Economic Analysis.

 

What is offered is a rather bright picture in many ways: while fiscal fragmentation persists, the risks have eased thanks to some institutional reforms and especially the efforts of the ECB to intervene in the sovereign debt markets. However, considering the US’ evolving commitment to European security, the continent will have to reprioritize spending in the direction of defense and investment.

 

There’s lots here: have a look by following this link: https://www.jstor.org/stable/27422914?searchText=ICRG&searchUri=%2Faction%2FdoBasicSearch%3FQuery%3DICRG%26so%3Dnew&ab_segments=0%2Fbasic_search_gsv2%2Fcontrol&refreqid=fastly-default%3A87db8aab9923069419c4dc271dd9a874&seq=25

 

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