US and Japanese debt levels are as bad or worse than in the euro zone, IMF chief economist Olivier Blanchard warned in a French newspaper interview on Thursday, saying countries should over time target debt-to-GDP levels of 40 percent or less.
“The crisis has revealed that we go from 60 to 100 percent (of GDP) quickly. That’s true for the euro zone but not exclusively,” Blanchard said in an interview with Les Echos. “The United States and Japan’s situation are in this respect as bad or even worse.”
He said that while countries should aim for a debt-to-GDP ratio of 40 percent in the long term, they should now focus on 60 percent. Ideally, countries should target cuts in long-term spending which spare demand in the short-term with measures such as gradual increases in the retirement age, Blanchard said.