Every finance bill draws the same curve: debt that rises a little more, then bends back toward the reasonable, "starting next year." No one disputes that it must be lightened. And yet debt obeys a mechanics of its own that undoes the effort meant to reduce it. The more you tighten to descend, the more interest compounds, the weaker growth becomes, the higher rates climb. The virtuous path is not wrong in theory. It contradicts itself in fact.
1 The gentle slope always promised
The setting: a budgetary ritual where the effort always begins tomorrow.
The ritual
A curve that comes down, next year, every year
Stability programs, finance bills, multi-year trajectories: all tell the same story. Debt peaks soon, then tilts back toward the reasonable, provided a course of savings is held "from the next fiscal year." The device is so regular it becomes suspect: the descent is always for later. In France, public debt passed €3.5 trillion in the first quarter of 2026, or 117.5% of gross domestic product, while the state planned to borrow a record amount near €310 billion over the year. The paradox to name at once: this virtuous trajectory contradicts itself, not through ill will, but by construction.
2 The relentless arithmetic
The key concept: the gap between the rate and growth commands everything.
The mechanics
r versus g, and the primary balance
Debt dynamics fit into one simple idea. From one year to the next, the weight of debt relative to GDP moves according to two forces: on one side, the gap between the interest rate paid (which economists call r) and the economy's growth rate (called g); on the other, the primary balance, that is, the budget excluding interest. When growth exceeds the interest rate (g > r), the economy "dilutes" the debt faster than it costs: the ratio falls almost on its own. But when the rate exceeds growth (r > g), the mere servicing of the debt makes it swell faster than GDP. This is the "snowball" effect: interest is added to the principal, which in turn produces more interest.
The forgotten consequence
As soon as r > g, stabilizing the debt is no longer enough to balance the current budget: a primary surplus is required, all the larger the higher the debt already is. In other words, the more indebted you are, the greater the effort needed simply not to sink deeper. The snowball imposes an ever-steeper slope the longer you let it roll.
3 The end of the blessed era
The shift: the 2010s "free lunch" is over.
The regime shift
When rates climb back above growth
For a decade, debt seemed painless. After the 2008 crisis and until the pandemic, interest rates stayed durably below nominal growth: debt rose, but its cost stayed stable, even fell. The economist Olivier Blanchard summed up that singular moment: when r < g, borrowing has almost no budgetary cost, a historic "free lunch." That regime has closed. The inflation surge, the rise in policy rates and the return of risk premia have brought r back above g in several countries. The snowball, long asleep, is waking and pushing the ratio up by its own mechanics.
Public interest, world
2.9%
of GDP in 2025, up from 2.0% in 2020 (IMF); the bill rises again everywhere.
Global public debt
> 100%
of GDP expected by 2029, the highest since 1948 (IMF, Fiscal Monitor, October 2025).
4 The bill that devours
The real cost: every dollar of interest is a dollar that neither teaches nor heals.
The scale
Interest overtakes the core functions of the state
The figures give the measure. In France, the interest bill on state debt, around €60 billion in 2026 and perhaps far more depending on the scope, now rivals the education budget and exceeds defense (excluding pensions); the governor of the Banque de France has warned it could near €100 billion a year by 2029 if rates stay high. In the United States, net interest reached $970 billion in 2025, overtaking defense ($917 billion), crossing $1 trillion gross for the first time, and becoming the third-largest federal outlay. Every euro, every dollar of interest is one that funds neither school, nor hospital, nor the future: the crowding-out effect, in plain sight.
5 Austerity that bites its own tail
The heart of the paradox: cutting to reduce debt can make it rise.
The reversal of effort
When the multiplier exceeds one
Here is where virtue turns. Cutting a deficit should lighten the debt; that is what theory said before 2010. But Olivier Blanchard and Daniel Leigh showed, studying Europe's post-crisis austerity plans, that their recessionary effects had been systematically underestimated: the fiscal multiplier, far from small, exceeded one. Now when a one-euro cut destroys more than one euro of activity, GDP, the ratio's denominator, falls faster than the debt, its numerator. The debt-to-GDP ratio can then rise instead of falling. The virtuous effort produces the opposite of its aim: you tighten the belt, and the ratio grows heavier.
The cyclical trap
This reversal is no universal fate: it strikes above all in a weak economy, when the central bank cannot offset the fiscal cut. In those conditions, the work stemming from these debates estimates roughly a one-in-four chance that the debt ratio rises in the first years of a consolidation. Austerity mistimed in the cycle does not reduce debt: it feeds it, while damaging the very growth one would need to escape.
6 The doubt loop
The third channel: the market judges, and its doubt makes debt dearer.
The vicious circle
Heavy debt, risk premium, rates, bill, debt
The last driver is as psychological as financial. Debt judged too heavy, or a trajectory judged not credible, raises the risk premium lenders demand: the rate r climbs, hence the bill, hence the deficit, hence the debt, which worries all the more. It is a self-reinforcing loop, what analysts call a "spiral" or a "doom loop." Britain's autumn 2022 episode was the demonstration: a budget judged imprudent sent government bonds tumbling in days, forcing a reversal. The market set itself up as judge of the trajectory, a theme we explored with the toll of time and the term premium. The lesson: at equal debt, it is credibility that sets the cost.
7 The disguised exits
The real exits: some are not virtuous, only discreet.
The inventory without naivety
Inflation, growth, restructuring
How does one escape, historically, an over-heavy debt? Rarely by austerity alone. The most frequent path is inflation combined with financial repression: by keeping real rates below growth, one lets rising prices erode the real value of the debt; the saver then repays the debt without knowing it. The second path, the only truly benign one, is growth: raising g cuts the ratio with no apparent pain, but it is slow and cannot be decreed. The third, extreme, is restructuring or default, which wipes out the debt at the price of trust and access to credit. The uncomfortable lesson: several "solutions" to the debt problem are not exercises in virtue, but discreet transfers, often from savers to the state.
8 When the descent works
A first counterpoint: austerity is not always self-defeating.
The nuance
The regime, the timing, the composition
One must not conclude that every effort is vain. Deleveraging works when it is well placed. In a strong economy, when growth is solid and the central bank can accompany, cutting the deficit truly lightens the debt. It also works when the consolidation is credible and spread out rather than brutal, and when r stays below g. History offers successful deleveragings: after 1945, most major countries melted colossal debts through a mix of strong growth, inflation and financial repression, more than by pure austerity. The debate over "expansionary austerity", the idea that a credible consolidation can support activity through confidence, remains lively and contested: its success depends closely on context, timing and composition (cutting spending or raising taxes does not have the same effect).
9 Debt is not the enemy
A second counterpoint: guard against denial as much as against catastrophism.
The right measure
Not all debt is equal, and collapse is not written
Symmetrically, it would be wrong to demonize debt as such. Debt that funds a productive investment, infrastructure, research, education, raises g and can therefore repay itself; it differs from pure operating debt. A state is not a household: it does not die, it refinances continuously, and it borrows in its own currency when sovereign, which changes the nature of the risk. Finally, r − g can turn favorable again: nothing guarantees rates will stay high. One must therefore beware prophecies of imminent collapse: Japan has lived with a debt near 240% of GDP for years without a crisis. The real risk is not a sudden "wall," but slow suffocation: a growing share of the budget seized by interest, and room to maneuver going out.
10 No virtue without lucidity
The close: the mechanics commands, not the intentions.
The meaning of the paradox
Naming who pays, rather than promising a curve that descends on its own
At bottom, the "virtuous path" is not a lie: it is an intention that the mechanics of debt contradicts the moment it is applied without discernment. Interest compounds faster than you cut; mistimed austerity destroys the growth that alone could lighten the burden; distrust makes everything dearer. Recognizing this trap is not a call to inaction: it is to stop awaiting the budgetary miracle and to pose the real trade-offs. The honest question is not "when will the debt come down?", but "through which channel, and at whose expense?". Displayed virtue is not enough; only lucidity about the mechanics allows one to choose levers that, themselves, do not turn against you.
The compass
①
No descent is painless. Beware any trajectory that promises a fall "soon" without naming who pays: the taxpayer, the saver, or the public service. As soon as r > g, the snowball demands a primary surplus, all the heavier the higher the debt.
②
Growth and time beat the shock. When the multiplier exceeds one, cutting brutally destroys the denominator (GDP) more than the numerator (debt): the ratio rises. Spreading the effort and preserving g does more for deleveraging than austerity mistimed in the cycle.
③
The real enemy is distrust, not one year's deficit. At equal debt, credibility sets the rate, hence the bill. Without catastrophism: the danger is not a sudden "wall" but slow suffocation. This sheet illuminates a debate; it is not investment advice.
Read alongside: When the saver repays the debt without knowing it, When repaying costs more than healing and teaching, and The toll of time we thought abolished. Reference: abbreviations & acronyms (IMF, GDP, ECB).