US government debt continues to grow, increasing the uncertainty about the country’s economic stability. The United States is strongly dependent on Europe to finance its growing government debt, which is not always highlighted in the debate, says Niku Määttänen.
If Europe started selling its US government bonds, it could create major problems for the US economy. Interest rates would rise and it would be more expensive for the United States to borrow money.
The economics professor Niku Määttänen At the University of Helsinki, however, this is not that easy. If Europe begins to sell its bonds, the value of them may collapse, which would also mean losses for European investors.
Although Europe has a great economic power through its bonds, it is not an easy weapon to use. Since other investors can take over if Europe sells its holdings, the effect would be limited.
– As soon as a country or investor begins to dump US bonds, the value of these securities is raging. Therefore, economists have so far not seen it as a realistic scenario, says Niku Määttänen in a interview.