A new academic paper suggests an influential study used to argue the case for austerity contains a number of flaws - including a simple Excel spreadsheet error.
Carmen Reinhart and Kenneth Rogoff's 2010 study 'Growth in a Time of Debt' found economic growth goes into reverse when a country's public debt to GDP ratio exceeds 90%.
The findings have subsequently been highlighted by politicians on both sides of the Atlantic, including European Commissioner Olli Rehn, as a reason for implementing stringent deficit reduction plans.
Yesterday, however, a trio of economists said the study's methodology contains several flaws - including an Excel error which meant the relatively resilient GDP growth seen in debt-saddled Belgium was simply omitted from the results.
"First, Reinhart and Rogoff selectively exclude years of high debt and average growth. Second, they use a debatable method to weight the countries. Third, there also appears to be a coding error that excludes high-debt and average-growth countries," said Thomas Herndon, Michael Ash and Robert Pollin, authors of the new study.
"All three bias in favour of their result, and without them you do not get their controversial result."
When these factors are taken into account, the average real GDP growth rate for countries with debt to GDP of over 90% stands at 2.2%, not the 0.1% contraction found by Reinhart and Rogoff, according to the new paper.
Responding to the claims, Reinhart and Rogoff did not address the Excel issue, but noted the new results still suggested countries with high debt to GDP ratios experience lower levels of growth than their peers.
"The cumulative effects of small growth differences are potentially quite large. It is utterly misleading to speak of a 1% growth differential that lasts 10-25 years as small," they said.
The findings emerge at a time when Chancellor George Osborne is coming under growing pressure to reassess the UK's deficit reduction plan as growth stagnates.
The Office for Budget Responsibility now expects public sector net debt as a proportion of GDP - currently around 75.9% - to keep rising until 2016-17, when it will reach a peak of 85.6%.
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