Professor Wojciechowski: The New Logic of Crises

The global economy faces a new and potentially dangerous mindset: the assumption that future crises will be as manageable as recent ones. This belief, rather than war, inflation, or public debt, is identified as the greatest threat by a recent report from the Bank for International Settlements (BIS), often called the "bank for central banks."

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The greatest threat to the world economy today is neither war, nor inflation, nor even public debt. It is the belief that since the last crisis turned out to be milder than expected, the next one will also be so.

The BIS report, "Annual Economic Report 2026," details a shift in how modern crises propagate. It argues that the world has entered an era of "poly-crises," where multiple threats do not appear in isolation but overlap and mutually reinforce each other. Each successive shock diminishes the capacity to respond to the next, challenging the effectiveness of traditional safety buffers like reserves, alternative supply routes, and demand reduction.

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The world has entered an era of poly-crises. Threats no longer appear individually, but overlap and mutually reinforce each other.

A key finding highlighted by Professor Wojciechowski, referencing the report, is the "new fiscal-financial stability nexus." This describes a situation where problems in public finances and the financial sector are no longer distinct but become intertwined, creating a feedback loop. Historically, the focus was on public debt levels for fiscal security. However, the BIS report emphasizes the growing importance of the structure of investors financing public debt and the functioning of the bond market.

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The 'new fiscal-financial stability nexus' is a situation where public finance and financial sector problems cease to be separate and begin to mutually drive each other.

As the bond market evolves, influenced by entities like hedge funds and highly leveraged investors, fiscal space can shrink rapidly. A significant shock to the bond market, even without a loss of fiscal credibility, can lead to reduced liquidity and rising yields. This forces governments to refinance debt at a higher cost, quickly turning financial market disruptions into public finance problems. The report suggests that the next crisis might originate not from deteriorating public finances, but from disturbances within the bond market itself, reversing the traditional crisis logic in developed economies.

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Disturbances in the bond market can be the first to destabilize public finances.