Global debts have reached a record high despite efforts by governments to reduce public and private borrowing, according to a report that warns the “poisonous combination” of spiraling debts and low growth could trigger another crisis.

Modest falls in household debt in the U.K. and the rest of Europe have been offset by a credit binge in Asia that has pushed global private and public debt to a new high in the past year, according to the 16th annual Geneva report.

The total burden of world debt, excluding the financial sector, has risen from 180% of global output in 2008 to 212% last year, according to the report.

The study by a panel of senior academic and finance industry economists accuses policymakers in many countries of failing to spur sustainable growth by capitalizing on historically low interest rates while deterring exuberant lending.

It called for Brussels to write off the debts of the Eurozone’s worst-hit countries and urgently embark on a “sizable” program of electronic money creation or quantitative easing to push down long-term interest rates.

It said unless policymakers kept a lid on risks in the financial system, especially overvalued property and stock markets, a trend for investing in assets with borrowed money could run out of control.

The Geneva report, which is commissioned by the International Center for Monetary and Banking Studies, follows a study earlier this year by the Bank of International Settlements (BIS), which diagnosed the same problem, but said risky borrowing could only be discouraged by higher interest rates.

The Geneva report instead argued a concerted effort to tackle the after-effects of the crisis was needed to mitigate a “poisonous combination of high and rising global debt and slowing nominal GDP [gross domestic product], driven by both slowing real growth and falling inflation.”

Arguing that the European central bank had taken several missteps in efforts to orchestrate a broader revival, it said: “Further procrastination in implementing these by now urgent policy measures would risk, in the medium term, the resurgence of pressures on the sustainability of the Eurozone itself.

“Contrary to widely held beliefs, the world has not yet begun to de-lever and the global debt to GDP ratio is still growing, breaking new highs.”

A lack of sustainable growth dates to the 1980s, according to the Geneva economists, who document the rise of debt-fueled household and government spending over the past 30 years. After the financial crisis, debts increased dramatically in the west, but efforts to reduce them have been outstripped by a rise in borrowing across Asia.

Similarly to an earlier BIS report, the Geneva economists are particularly worried by a borrowing binge in China, which they said Beijing should reduce, though this would slow growth and have a negative knock-on effect on global recovery.

Luigi Buttiglione, co-author of the report and head of global strategy at the Brevan Howard hedge fund, said: “Over my career I have seen many so-called miracle economies – Italy in the 1960s, Japan, the Asian tigers, Ireland, Spain and now perhaps China – and they all ended after a build-up of debt.”

A mix of moderate debt reduction, low interest rates and huge monetary stimulus in the U.K. and U.S. were praised in the report, though with a health warning that increased central bank debt and a reliance on rising household indebtedness could undermine the recoveries.

The International Monetary Fund, which meets in Washington next week, has aligned itself with the thinking behind the Geneva report. It has advocated that governments maintain low interest rates and embark on fiscal stimulus where necessary to maintain growth and prevent deflation.

However, it is expected to voice concerns that public sector borrowing in China, mainly by local authorities and state enterprises, has reached unsustainable levels.

Chistine Lagarde, the IMF’s director general, is expected to warn that slowing global growth could encourage investors to take bigger, riskier bets to maintain their income, undermining the stability of the recovery.

Originally published by The Guardian