The rich world faces a brutal spending crunch

A decade ago finance ministries were gripped by austerity fever. Governments were doing all they could to cut budget deficits, even with unemployment high and economic growth weak. Today things are very different. Across the West, most economies are in better shape. People have jobs. Corporate-profit growth is strong. And yet governments are spending a lot more than they are taking in.

No government is more profligate than America’s. This year the world’s largest economy is projected to run a budget deficit (where spending exceeds taxation) of more than 7% of GDP—a level unheard of outside recession and wartime. But it is not the only spendthrift country. Estonia and Finland, two normally parsimonious northern European countries, are running large budget deficits. Last year Italy’s deficit was as wide as in 2010-11, following the global financial crisis of 2007-09, and France’s grew to 5.5% of GDP, well above forecasts. “I am calling for a collective wake-up call to make choices in all of our public spending,” announced Bruno Le Maire, its finance minister, last month.