	Introduction

In many advanced economies, the global financial crisis of 2008-2009 and ensuing recession resulted in large fiscal stimulus packages, the nationalization of private-sector debt, lower tax revenue, and higher government spending. In many of these fiscal debates, parallels are drawn between the United States and other advanced economies, such as Greece, Ireland, and the United Kingdom. Third, how other countries reduce their debt impacts the U.S. economy. Most advanced economies are implementing fiscal austerity programs to lower their debt levels. Simultaneous austerity programs in the advanced countries, the United States' major trading partners, could depress demand for U.S. exports abroad, as well as deter investment in and from advanced economies. Background Definitions and Concepts

		Why and How Governments Borrow

Sovereign debt, also called public debt or government debt, refers to debt incurred by governments. Some argue that if growth returned to the economy, debt levels would fall due to rising tax receipts and lower spending on programs such as unemployment insurance. Long-term trends, however, suggest that aging populations could strain public finances in advanced economies in coming years, and that public debt levels could continue to be a problem. Challenges Posed by High Levels of Debt

Historically high public debt levels in advanced economies, combined with the threat of additional debt increases due to age-related spending, have become a source of serious concern for a number of reasons. To date, four Eurozone countries (Greece, Ireland, Portugal, and Cyprus) have come under this type of market pressure. Because private investment is important for long-term economic growth, government budget deficits tend to reduce the economic growth rate. However, because the financial assistance provided by the IMF, as well as from the European countries in the case of Greece, Ireland, Portugal, and Cyprus, takes the form of loans, others argue that this financial assistance only exacerbates the country's problems and leads to ever-increasing debt levels. Current Strategies

The primary policy response across advanced economies to historically high debt levels has been fiscal austerity. Issues for Congress

		Is the United States Headed for a Eurozone-Style Debt Crisis? Some analysts, as well as some Members of Congress, have expressed concern that the United States is headed towards a debt crisis similar to those experienced by some Eurozone countries. The United States also has a strong historical record of debt repayment that helps bolster its reputation in capital markets. Bond market data indicate that investors do not view the United States in a similar light to Greece, Ireland, or Portugal. Higher bond spreads indicate higher levels of risk. Policy Options for Congress

Most advanced economies, including the United States, have focused on addressing high debt levels through fiscal austerity. Additionally, some argue that Congress can urge the Administration to address the issues related to historically high levels of sovereign debt issues in multilateral discussions, particularly in the context of the G-20 and the international financial institutions (IFIs). Data on General Government Debt and U.S. Bank Exposure Overseas
Sovereign debt, also called public debt or government debt, refers to debt incurred by governments. Since the global financial crisis of 2008-2009, public debt in advanced economies has increased substantially. A number of factors related to the financial crisis have fueled the increase, including fiscal stimulus packages, the nationalization of private-sector debt, and lower tax revenue. Even if economic growth reverses some of these trends, such as by boosting tax receipts and reducing spending on government programs, aging populations in advanced economies are expected to strain government debt levels in coming years.
High levels of debt in advanced economies arose as an issue for concern for some analysts following the global financial crisis, after decades of attention on debt levels in developing and emerging markets. Four Eurozone countries, Greece, Ireland, Portugal, and Cyprus, have turned to the International Monetary Fund (IMF) and other European governments for financial assistance. Some analysts and policymakers are also concerned about are also concerned about debt levels in other advanced economies.
To date, many advanced-economy governments have embarked on fiscal austerity programs (such as cutting spending and/or increasing taxes) to address historically high levels of debt. This policy response has been criticized by some economists as possibly undermining a weak recovery from the global financial crisis. Others argue that the austerity plans do not go far enough, and that more reforms are necessary to bring debt levels down, especially considering the aging populations in many countries.
Issues for Congress
Is the United States headed for a Eurozone-style debt crisis? Some economists and Members of Congress fear that, given historically high levels of U.S. public debt, the United States is headed towards a debt crisis similar to those experienced by some Eurozone countries. Others argue that important differences between the United States and Eurozone economies, such as growth rates, borrowing rates, and type of exchange rate (floating or fixed), put the United States in a stronger position. The United States has a long historical record of debt repayment, and bond spreads indicate that investors currently view the United States as far less risky than Greece, Ireland, or Portugal. Impact on U.S. economy. The focus of most advanced economies on austerity programs to lower debt levels could slow growth in advanced economies and depress demand for U.S. exports. Financial instability stemming from high debt levels could also impact U.S. markets and financial institutions. Policy options for Congress. Congress is debating proposals to reduce federal debt levels in the United States. Congress could urge the Administration to coordinate fiscal policies multilaterally to avoid simultaneous austerity measures that undermine the economic recovery.