Revista de Economie Mondiala/ Journal of Global Economics

17-32

Authors: Rodica Velciu

At the beginning of the second decade of the 21st century, the sovereign debts of one of the largest economies of the world were “blown up” because of the ageing population and the costs determined by the financial crisis. According to an analysis by Standard & Poor’s rating agency, if governments maintain current fiscal policies, for 49 states representing 2/3 of the world population, the average debt as percentage of GDP will reach 245% by 2050. "The pressure of increasing expenses will determine profound changes in the economical perspectives of these countries. The erosion will start in 2015, when the quota of many states with high rating will start being under pressure", declare the Agency’s analysis. In mid April 2011, Barack Obama announced the elaboration of an ambitious plan for the reduction of the federal budget deficit, in total amount of USD 4,000 billion, over a period of 12 years. Democrat and Republican leaders of the Congress reached an agreement in respect to the raise of the debt limits, after months of intense closed-doors negotiations and only two days before the due date set by the Ministry of Finance. In order to avoid payment default, democrats and republicans reached an agreement to increase the leveraging to USD 14,300 billion, by USD 2,100 billion. Moreover, this agreement establishes a reduction of governmental expenses for the next 10 years with up to USD 3,000 billion and enough loans in order to avoid another increase in the leveraging limits in 2013. In turn, FED announced they will maintain stimulating policies for another two years, although in June the economic stimulation program should have ended. The monetary policy interest rate is at the lowest level in the history of the Central Bank, between 0% and 0.25% since 2008. At the beginning of September, President Barack Obama presented a new plan of economic revival and labor market support for a period of six years, rounded at USD 447 billion, in the attempt to avoid a new recession and in order to rebut a layoff that tends to stay at over 9%. Republicans fought some of the actions of the new plan, and also the solution of its financing, ensured 50% by increasing contributions for the rich contributors and eliminating fiscal facilities for the big corporations.