IMF WEO: wartime defense surges drive debt up ~14pp, crowd out social spending

Analysis
The IMF's formal modeling, deficits widening 2.6 GDP points, debt building 7 points within three years, 14 points under active wartime, gives finance ministries numbers they cannot easily paper over, and the politically inconvenient corollary is that the durable debt overhang these surges leave falls hardest precisely where defense budgets are rising fastest. The quiet line in the April WEO is the implicit recession signal if the Iran war extends, which pairs with a Europe-wide pattern of governments (Reeves, Babis, others) ruling out tax hikes while compressing social budgets, a fiscal squeeze that is already structurally underway, not merely modeled. Sovereign debt markets have not yet priced the full military-spending acceleration; very likely by Q3 peripheral EU sovereigns see spreads widen as fiscal-slippage forecasts catch up. Sustained allied buildups in a multipolar threat environment may instead crowd in private capex and defense-adjacent R&D in ways the IMF's backward-looking, post-Cold War demobilization cases cannot capture; if that dynamic is real, the fiscal penalty is overstated. The historical base rate on wartime debt buildup, corroborated across converging IMF and fiscal-policy reporting, argues against discounting the deterioration.