Debt Sustainability with Implicit Government Debt - Guiding Principle or Will-O’-The-Wisp?

Implicit public debt is a calculation based on assumptions that are qualitatively and fundamentally different from explicit public debt, i.e. it cannot be added to the latter. Moreover, they distort the real costs of ageing considerably. This creates a mirage of public debt that drives fiscal policy in the wrong direction like a will-o’-the-wisp. The costs of demographic change are systematically overestimated.