Macroeconomist Edin Mojacek has more confidence in the US than in many European countries when it comes to the pension bill. “A country like Germany has allocated very little money for the huge bill that will be presented in the future. Moreover, the US economy is more flexible and dynamic.
First of all, the “Euroland” is not a real country, but a monetary union of several countries. Strength here depends on the weakest links. If you look at it that way, the national debts of Italy, France and Spain – which are well above 100 percent – are a real cause for concern. But the most important thing, says Mojacek, is that you don’t look at government debt statically, but dynamically. “By this I mean that you have to take into account other factors that can play an important role.”
What is your conclusion then?
When I look at it that way, I have more confidence in the United States, which has a national debt of over 100 percent, than I do in Germany. The latter country's national debt is only 64 percent of the economy. If you look at this dynamically, you have to ask the question of how sustainable the national debt is. There are two things that play a role in that: the ability of the economy to grow – which is basically the income of the government of the country, and the bills that will be presented to the country in the future.
Will the American economy then triumph over the German economy?
It is true that they are more flexible and dynamic than European economies, and their productivity is rising faster than ours. Secondly, of all the bills that have to be paid in the future, the retirement account is one of the largest. When I look at what is actually saved for future pensions, I see 10 to 15 percent of the economy in France, Italy and Spain. These are private savings, and government savings are even smaller. In the United States, 130 percent of the economy has been shut down. These are very different numbers.
What about the aging population in both regions?
The American population is younger on average, so the elderly population will arrive later. So the sustainability of the debt is not determined simply by the level of the national debt at any given time, but by the sum of several factors. The US national debt situation is worrisome, don’t get me wrong. But there are big differences between the US and almost every other eurozone country. That’s why I say I have more faith in the US than in Germany. That country has put too little money into the huge bill that is coming up.
Are there exceptions to the rule?
This is like asking about the usual path: The Netherlands is now a strong country and will remain so in the future thanks to 200% of GDP in pension reserves. It is better to compare it to a car with and without working brakes: it is better to drive at 200 km/h in a car with working brakes than at 50 km/h in a car without working brakes. That is why, looking ahead, I am more confident that the United States can handle its national debt than many European countries.
