National Debt

The inexorable rise in global debt ratios is fuelling fears of a sovereign debt crisis. So far, it is mainly organisations such as the International Monetary Fund and the World Bank that are expressing concern. Optimists, meanwhile, see government investment programmes as a driver of economic growth. A comprehensive assessment of the risk situation is needed.

Investors' eyes remain fixed on the war in Ukraine, the Gaza conflict and US tariff policy, which continue to dominate the headlines and cause ongoing uncertainty. However, the stock markets remained largely unaffected by this in 2025 and in some cases reached new highs.

Meanwhile, new trouble is looming on the horizon, which has so far received little attention and whose relevance is even being downplayed by some experts: global government debt is spiralling inexorably to threatening levels. At the end of 2025, it reached another record high worldwide.

However, developing and emerging countries are no longer at the top of the list of the most indebted countries. There, it is largely considered normal for debt to exceed economic output. Rather, it is industrialised countries that are accumulating debt at a rapid pace. Since the financial crisis of 2008, their debt has grown particularly rapidly and has literally exploded as a result of the coronavirus pandemic. The debt ratio of the G7 countries peaked at over 125 per cent in autumn 2025. By way of comparison, at the end of the Second World War, this figure stood at 132 per cent. The International Monetary Fund (IMF) and the World Bank have been warning of a global sovereign debt crisis for some time now.

Unstoppable rise in debt ratio

X-Achse: Prozent des BIP, Y-Achse: bei 2000 beginnen, Legende Chart: Entwicklungs- und Schwellenländer, Industrieländer, Welt, G7-Staaten, Quelle: IWF, Oktober 2025, https://www.imf.org/external/datamapper/GGXWDG_NGDP@WEO/OEMDC/ADVEC/WEOWORLD/MAE

Nevertheless, the mountains of debt are likely to continue growing unabated. This is because ongoing maintenance and necessary expansion of infrastructure, educational measures, rising defence spending, financing the energy transition and coping with natural disasters will require further enormous government investment in the foreseeable future.

Certain experts now take the view that the scale of debt is not a problem, as various sectors would benefit from government investment, meaning that governments would ensure economic growth. However, this view is one-sided. Although future generations will benefit from such investment, they will also suffer from the debt burden that is accumulated as a result. In addition, a number of countries will have to take on extensive debt in the coming years in order to finance longevity. Pension payments will not benefit future generations. Or, as former Federal Councillor Ueli Maurer put it during his time as finance minister: ‘When we incur debt, we are spending our children's money.’

Debt servicing is also proving to be a ticking time bomb. The interest payable on borrowed capital is prompting various countries to keep interest rates artificially low in order to continue servicing their debts. This is because an increase in interest rates could put the countries concerned in serious financial difficulty and also jeopardise the independence of their central banks. The United States, for example, already spends more money on interest payments than on its military. The higher the debt and interest payments, the less money is available for investment.

However, the IMF is also concerned that the reported national debt may not correspond to the actual debt. It is therefore pushing for transparency in two respects with regard to so-called hidden debt. Countries that raise money through credit instruments other than traditional bonds will be required to report these in future. At the same time, they should disclose the debts of state-owned and state-affiliated enterprises. This is intended to prevent debt crises arising out of nowhere and to counteract a loss of confidence on the part of investors.

Exemplary Switzerland

Switzerland is the big exception in the global landscape of sovereign debtors. With just over CHF 140 billion in debt, or a debt ratio of less than 20 per cent of gross domestic product, it is the ‘model pupil’ among sovereign debtors. It owes its comparatively low level of debt to the debt brake introduced in 2003 and enshrined in the constitution, which obliges the federal government to keep its expenditure in balance with its revenue in order to avoid chronic deficits and rising debt.

In exceptional cases, such as the coronavirus pandemic, it can relax the debt brake, but must repay the resulting debt promptly. In Germany, which has the same mechanism and a similarly low level of debt to Switzerland, there are currently growing calls for the debt brake to be relaxed in order to finance rising defence costs.