# Debt limit > Mediated Wiki article. Canonical URL: https://mediated.wiki/source/Debt_limit > Markdown URL: https://mediated.wiki/source/Debt_limit.md > Source: https://en.wikipedia.org/wiki/Debt_limit > Source revision: 1264078562 > License: Creative Commons Attribution-ShareAlike 4.0 International (https://creativecommons.org/licenses/by-sa/4.0/) {{Short description|Legislative mechanism restricting borrowing}} {{For|the mechanism in the United States|United States debt ceiling}} A '''debt limit''' or '''debt ceiling''' is a legislative mechanism restricting the total amount that a country can borrow or how much debt it can be permitted to take on. Several countries have debt limitation restrictions. == Description == A debt limit is a legislative mechanism restricting the total amount that a country can borrow or how much debt it can be permitted to take on. It is usually set as percentage of [GDP](/source/GDP), but in a few cases as an absolute amount (for example, $200 billion).{{Cite web | url=http://www.investmentfrontier.com/2013/10/08/7-countries-with-debt-ceilings-or-limits/ | title=7 Countries with Debt Ceilings or Limits | date=8 October 2013 | publisher=InvestmentFrontier |archive-url=https://web.archive.org/web/20210802080103/https://investmentfrontier.com/2013/10/08/7-countries-with-debt-ceilings-or-limits/ |archive-date=2 August 2021 | url-status=dead }}{{cite book | last=Awadzi | first=E.A. | title=Designing Legal Frameworks for Public Debt Management | url=https://www.imf.org/en/Publications/WP/Issues/2016/12/31/Designing-Legal-Frameworks-for-Public-Debt-Management-43045 | date=2 July 2015 | publisher=International Monetary Fund | isbn=9781513529561 | access-date=19 January 2023 }} == Use == Several countries have debt limitation laws in place.{{cite web |url=https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/debt-limit |title=Debt Limit |publisher=[United States Department of the Treasury](/source/United_States_Department_of_the_Treasury) |access-date=2019-06-24}} Only Denmark and the [United States have a debt ceiling](/source/United_States_debt_ceiling) that is set at an absolute amount rather than a percentage of GDP.{{cite news | title=Why Do Only US and Denmark Have a Debt Ceiling? | url=https://www.usnews.com/news/articles/2013/10/11/why-do-only-us-and-denmark-have-a-debt-ceiling | date=11 October 2013 | publisher=USNews | access-date=19 January 2023 }} The [US Congress](/source/US_Congress) began using the measure in 1917 and modified the financing law in 1939 to give the treasury more flexibility in issuing debt.Alan Rappeport. (9 May 2023). "What is the debt ceiling?". [https://www.nytimes.com/live/2023/05/09/us/debt-ceiling-biden-mccarthy#what-is-the-debt-ceiling New York Times website] Retrieved 10 May 2023. In Denmark, a debt ceiling became necessary in 1993 as a [constitutional](/source/Constitution_of_Denmark) waiver when day-to-day responsibility for the [public debt](/source/public_debt) was transferred to the [National Bank](/source/Danmarks_Nationalbank) from the Ministry of Finance. It is regarded as a legal formality and consequently a broad consensus in the [Danish Parliament](/source/Danish_Parliament) has set the limit much higher than the actual debt, making the limit irrelevant (it has been raised once, in 2010 when the debt had reached about two-thirds the limit, the nearest it has ever been, at which point the limit was more than doubled).{{cite news | title=What the United States could learn from Denmark | url=https://www.ft.com/content/ce55cfe8-9baf-35e4-bce1-ce719ff24d8d | date=26 July 2011 | publisher=Financial Times | access-date=19 January 2023 }}{{cite web | last=Kirkegaard | first=J.K. | title=Can a Debt Ceiling Be Sensible? The Case of Denmark II | url=https://www.piie.com/blogs/realtime-economic-issues-watch/can-debt-ceiling-be-sensible-case-denmark-ii | date=28 July 2011 | publisher=Peterson Institute for International Economics | access-date=19 January 2023 }}{{cite news | title=There are (much) better ways to control US spending than a debt ceiling | url=https://qz.com/2066624/why-the-us-should-get-rid-of-its-debt-ceiling | date=30 September 2021 | publisher=Quartz | access-date=19 January 2023 }} Limits as a percentage of GDP are more widespread. Poland has a [constitutional](/source/Constitution_of_Poland) limit on public debt, set at 60% of GDP; by law, a budget cannot pass with a breach in place.{{Cite web | url=http://www.sejm.gov.pl/prawo/konst/angielski/kon1.htm |title = The Constitution of the Republic of Poland}} Examples of other countries that have debt limits as a percentage of GDP are Kenya, Malaysia, Namibia and Pakistan. As part of the [Maastricht Treaty](/source/Maastricht_Treaty), all [member states of the European Union](/source/Member_state_of_the_European_Union) (except the United Kingdom, which had a [treaty opt-out from the EMU rules](/source/United_Kingdom_opt-outs_from_EU_legislation) while being a member), have since 1992 pledged via treaty legislation and European Union law to keep their general government debt below 60% of GDP (or on a sufficiently slowly declining trajectory towards respecting the 60% limit at some point in the future) and their annual general government [budget deficit](/source/Deficit_spending) below 3% of GDP (or if above it need to be corrected with a sufficiently acceptable declining speed over the following few years).{{cite web | title=Government finance statistics | url=https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Government_finance_statistics#Introduction | date=20 October 2022 | publisher=Eurostat | access-date=19 January 2023 }} A revision of the EU debt rule and deficit rule is planned (also known as the [Stability and Growth Pact](/source/Stability_and_Growth_Pact)),{{cite news | title=UPDATE 2-EU debt limit of 60% no longer makes sense - ESM's Regling | url=https://www.reuters.com/article/eu-debt-limit-idUSL8N2MS6JO | date=5 May 2021 | publisher=Reuters | access-date=19 January 2023 }}{{cite news | title=Europe rethinking its rules on government debt to meet new global challenges | url=https://www.euronews.com/next/2022/04/06/europe-rethinking-its-rules-on-government-debt-to-meet-new-global-challenges | date=6 April 2022 | publisher=EuroNews | access-date=19 January 2023 }} although when this revision was agreed and adopted in spring 2024, it was only minor - as no changes were made to the overall treaty legislation - with changes only agreed upon to the SGP related Regulations defining how fast and flexible countries shall correct a potential excessive deficit or debt level towards respecting the treaty defined maximum 60% of GDP debt level and 3% of GDP budget deficit level in the future.{{Cite web|url=https://www.euractiv.com/section/economy-jobs/news/eu-reaches-agreement-on-spending-rules/|title=EU reaches agreement on spending rules|publisher=Euractiv|date=12 February 2024|access-date=31 March 2024}}{{Cite web|url=https://www.euractiv.com/section/economy-jobs/news/eurogroup-says-new-fiscal-rules-will-require-public-spending-cuts/|title=Eurogroup says new fiscal rules will require public spending cuts|publisher=Euractiv|author=Thomas Moller-Nielsen|date=12 March 2024|access-date=31 March 2024}}{{Cite web|url=https://ec.europa.eu/commission/presscorner/detail/en/ip_24_711|title=Commission welcomes political agreement on a new economic governance framework fit for the future|publisher=European Commission|date=10 February 2024|access-date=4 April 2024}}{{Cite web|url=https://www.europarl.europa.eu/news/en/press-room/20240205IPR17419/deal-on-eu-economic-governance-reform|title=Deal on EU economic governance reform|publisher=European Parliament|date=10 February 2024|access-date=4 April 2024}} Between 2007 and 2013, Australia had a debt ceiling, which limited how much the Australian government could borrow. The debt ceiling was contained in section 5(1) of the ''Commonwealth Inscribed Stock Act 1911''{{Cite web|url=https://www.legislation.gov.au/Details/C2012C00872|title=Commonwealth Inscribed Stock Act 1911|date=November 18, 2012|publisher=Office Parliamentary Counsel|via=www.legislation.gov.au}} until its repeal on 10 December 2013. The statutory limit was created in 2007 by the [Rudd government](/source/Rudd_government_(2007%E2%80%932010)) and set at $75 billion. It was increased in 2009 to $200 billion,{{Cite web|url=https://www.theage.com.au/business/the-economy/debt-ceiling-all-because-of-west-wing-20131024-2w3jo.html|title=Debt ceiling - all because of West Wing?|date=October 24, 2013|website=The Age}} $250 billion in 2011 and $300 billion in May 2012. In November 2013, [Treasurer](/source/Treasurer_of_Australia) [Joe Hockey](/source/Joe_Hockey) requested Parliament's approval for an increase in the debt limit from $300 billion to $500 billion, saying that the limit will be exhausted by mid-December 2013.{{Cite web|url=http://www.theage.com.au/federal-politics/political-news/debt-ceiling-fights-ramps-up-20131114-2xht5.html|title=Debt ceiling fights ramps up|date=November 13, 2013|website=The Age}} With the support of the [Australian Greens](/source/Australian_Greens), the [Abbott government](/source/Abbott_government) repealed the debt ceiling over the opposition of the [Australian Labor Party](/source/Australian_Labor_Party). ==See also== * [Debt brake (Germany)](/source/Debt_brake_(Germany)) * [List of countries by public debt](/source/List_of_countries_by_public_debt) * [Natural borrowing limit](/source/Natural_borrowing_limit) ==References== {{Reflist}} Category:Government debt --- Adapted from the Wikipedia article [Debt limit](https://en.wikipedia.org/wiki/Debt_limit) by Wikipedia contributors ([contributor history](https://en.wikipedia.org/wiki/Debt_limit?action=history)). Available under [Creative Commons Attribution-ShareAlike 4.0 International](https://creativecommons.org/licenses/by-sa/4.0/). Changes may have been made.