Standard and Poor’s has warned that as borrowing costs go up some countries could see their credit ratings cut or outlooks lowered.
At the moment interest rates for most of the world’s top countries are at record lows but S&P says as and when they rise to more historically normal levels a number of major economies will likely be in trouble.
The ratings agency’s analysts looked at 25 countries and found that governments have not been reducing their spending nor has there been sufficiently higher growth and revenue which means when rates go up so will their deficits.
The United States, which has already started raising rates, would have had a headline deficit 1.3 percent larger last year under more normal circumstances, S&P calculated.
The issue was most pronounced in the eurozone, where the European Central Bank has justed started a new round of stimulus in the form of corporate bond purchases.
Italian, French and Spanish deficits would all have been about 2.0 percentage points higher. Germany’s balanced budget would have been replaced by a 1.6 percent deficit.
Outside the eurozone, Britain would have seen a deficit 1.9 percentage points higher. Poland and South Africa’s would have been 1.3 percentage points higher.