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Photo: Samuel Corum/Getty Images

More countries will soon face serious debt problems and likely defaults this year if swift action is not taken, World Bank president David Malpass said Tuesday, calling for debt restructurings and a focus on inequality and investment in the "post-COVID economy."

Why it matters: Malpass is the latest to issue a stern warning about the state of the global economy, calling on creditors, such as China and the Paris Club group of wealthy nations, to share the burden.

Where it stands: Malpass, a former Treasury Department official under President Reagan and Bear Sterns economist who was nominated by President Trump, called the current levels of debt in many countries “unsustainable" and said a growing number were currently on "red alert" for defaults.

  • "Given the sharp decline in short-term and long-term interest rates, we need to find ways to adjust the debt burden process so that the burden of debt on people in poorer countries can be reduced dramatically."

What we're hearing: In addition to the risk of increased debt defaults and rising poverty in developing economies, the World Bank's goal of increasing median incomes in countries "is not being met under the current environment," Malpass said.

  • This is "in part because the stimulus mechanisms that are out there are working toward concentrating the wealth rather than adding wealth from the bottom up," Malpass told Axios during a Q&A session with reporters.
  • "One thing that I think is important is that we recognize that creative destruction is important, meaning small businesses that fail due to the severity of the recession. But even more important is the creation of new small businesses, innovation."

He continued: "And so, that's going to mean countries actually allowing that process to happen and not simply working through their big structures to give funding to big companies."

One level deeper: "The risk is that it may take years for people at the bottom of the income scale to see a sustained improvement in their circumstances."

Go deeper

Coronavirus has inflamed global inequality

Illustration: Aïda Amer/Axios

History will likely remember the pandemic as the "first time since records began that inequality rose in virtually every country on earth at the same time." That's the verdict from Oxfam's inequality report covering the year 2020 — a terrible year that hit the poorest, hardest across the planet.

Why it matters: The world's poorest were already in a race against time, facing down an existential risk in the form of global climate change. The coronavirus pandemic could set global poverty reduction back as much as a full decade, according to the World Bank.

Trump political team disavows "Patriot Party" groups

Marine One carries President Trump away from the White House on Inauguration Day. Photo: Patrick Smith/Getty Images

Donald Trump's still-active presidential campaign committee officially disavowed political groups affiliated with the nascent "Patriot Party" on Monday.

Why it matters: Trump briefly floated the possibility of creating a new political party to compete with the GOP — with him at the helm. But others have formed their own "Patriot Party" entities during the past week, and Trump's team wants to make clear it has nothing to do with them.