Fairy tales are comforting because the lead characters usually possess a special power and something magical turns up, enabling everyone to live happily ever after. Across Europe and the United States, governments are running their budgets in such fantasy worlds. You do not need a particularly Germanic view of public finance to know this is unlikely to end well.

The Congressional Budget Office (CBO) warned last week that the US government finances were on an unsustainable path. The independent watchdog forecast that US government borrowing would be relatively stable over the next 10 years at about 6 per cent of gross domestic product (GDP). That level would far exceed the 3.7 per cent average of the previous 50 years, a period that included the global financial crisis and the coronavirus pandemic.