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According to the website of the Wall Street Journal on October 22, the United States and Europe have borrowed heavily during the entire period of the new coronavirus epidemic and the subsequent outbreak of the Russian-Ukrainian conflict. Now, with those immediate emergencies behind us, divisions have emerged: the US continues to allow its deficits to grow, while Europe's are expected to narrow significantly.

This is in stark contrast to a decade ago. At that time, the global financial crisis caused deficits to increase and brought some members of the eurozone to the brink of default. The lessons of that episode, combined with the rules of the eurozone, have forced European governments to exercise a degree of self-discipline that is now absent in the United States.

But European governments don't get much credit for it. Yields on government bonds have risen around the world over the past month. While many factors are at work, including central banks' efforts to bring down inflation, another key factor is the US deficit.

The US government said on October 20 that its deficit rose to $1.7tn, or 6.3% of gross domestic product, in the year to September 30, compared with a deficit of $1.4tn, or 5.4% of gross domestic product, the previous year.

In forecasts released earlier in October, the IMF projected that the U.S. deficit at all levels of government would reach 7.4 percent of gross domestic product in 2024 and 2025.

But the situation in Europe is different. The IMF expects the combined deficit of eurozone governments to fall from 3.6 percent of gross domestic product in 2022 to 3.4 percent this year and to 2.7 percent in 2024.

The country's budget deficit, which plunged into crisis a decade ago, is expected to shrink sharply. Greece's deficit is expected to fall to 1.6 percent of gross domestic product from 2.3 percent last year, while Portugal's is expected to fall to 0.2 percent from 0.4 percent. Ireland is expected to post a budget surplus for the second year running. Countries like Italy and France are still running deficits of about 5 percent.

Christian Keller, chief economist at Barclays, said: "The divergence in paths is really striking. The United States does not seem to be making any effort to reduce spending or increase revenue."

If these forecasts are confirmed, European governments will no longer be the main driver of world debt growth. The International Monetary Fund estimates that the increase in government debt over the next few years will be equivalent to 1 percentage point of economic output, but will be driven almost entirely by the United States and China. Without them, the debt burden would fall.

More than a decade ago, Europe was the focus of global worries about growing government debt. Greece, Portugal, Ireland and Cyprus were bailed out; Greece defaulted on part of its debt. That crisis was resolved through bailouts and support from the European Central Bank, government deficits in most European countries have been reduced, and then the epidemic began.

By contrast, the United States began running deficits larger than those of European countries in 2016 and borrowed heavily during the pandemic. The point is that the United States does not seem to have a path to narrowing the deficit: the tax increases proposed by the Biden administration are opposed by Republicans and some Democrats in Congress, while Republicans seek spending cuts that the Biden administration will not tolerate.

The broad framework of EU budget rules, drawn up in 1993 as part of the Maastricht Treaty that paved the way for the euro, limits budget deficits to 3 percent of gross domestic product. The rules were suspended in 2020 to allow the government to respond to the outbreak, and continued to be suspended after the Russia-Ukraine conflict to support households coping with rising energy prices. As a result, deficits widened and debt increased.

The projected decline in Europe's deficit largely reflects the phasing out of emergency support.

But beyond that, painful memories of the debt crisis may be why European governments are more resistant to rising deficits.

Valdis Dombrovskis, who enforces the EU's budget rules, told a news conference on Monday: "We need to get public finances back on track. Fiscal policy needs to be prudent."

European governments don't want the rules to be exactly the same as they were before the pandemic. An important objection is that these rules do not limit day-to-day spending, but encourage governments to hold back on investments that promote long-term growth, including the green transformation of the European economy. Some governments want the new rules to exempt certain types of investment spending, while others think it would make the rules too loose. With no consensus on reforming the rules, they will likely continue to be bound by the old rules in 2024.