Cyclical and structural public debt

There are two different kinds of government debt, cyclical debt and structural debt.

Cyclical public debt occurs when there is a recession in the economy if taxes not are sufficient to cover government spending. A cyclical public debt can be paid back when it the economy is booming. A structural public debt is more serious than a cyclical debt. A structural public debt occurs even when there is full employment in the economy and the gross domestic product is at it maximum considering available resources.

A structural public debt can not be paid back when the economy is booming. A structural public debt must be paid back through savings in the public budget.