One reason the US recovery is only partial is fiscal drag,a lingering effect of the post-2008 downturn, which shifted someleverage to the public sector, resulting in a growing debt burdenthat has been addressed – controversially so – by immediateausterity.

Costs of debt reduction need to be assessed by taking into account the risk of non-payment, as well as the benefits of removing the debt overhang as a drag on aid effectiveness and as a barrier for private investment and capital inflows;