Instituto Valenciano de Investigaciones Económicas
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IvieLAB. Analysis of the Consequences of Public Debt: Intergenerational Sharing of the Burden

IvieLAB. Analysis of the Consequences of Public Debt: Intergenerational Sharing of the Burden

Project start date: 2026
Project end date: research in progress
Funding institution: Generalitat Valenciana

The volume of public debt in the Region of Valencia has grown steadily over time and has reached very high levels relative to the region’s main indicator of fiscal capacity, gross domestic product (GDP). As a result, and given the evolution of interest rates, annual debt service costs now exceed €1 billion. The objective of this report is twofold.

First, it examines the extent to which debt restructuring and debt relief mechanisms could help address the current situation of high indebtedness, making it possible for the Region of Valencia to regain access to financial markets and reducing the risk of scenarios that could require severe adjustments to public finances.

Second, the study assesses the rationale for establishing an intergenerational compensation fund aimed at distributing more fairly across generations both the costs and the benefits associated with public borrowing and debt reduction. The analysis considers how such a mechanism could contribute to a more balanced allocation of fiscal burdens over time while supporting long-term financial sustainability.

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