The role of households in financing government debt in euro area
Prepared by Jeanne Pavot and Vilém Valenta
1 Introduction
The coronavirus (COVID-19) pandemic has reinvigorated interest in how governments finance their spending to an extent not seen since the global financial and euro area sovereign debt crises of 2008-12. Economic crises of such depth require governments to take decisions on how far the crisis-related costs should be financed by spending cuts elsewhere in the budget, by revenue increases and/or by incurring additional debt. At the same time increases in government debt raise questions as to the optimal financing strategy in terms of instruments and maturities, but also the investor base.