A favorable differential between the interest rate on government debt and the growth rate of the economy does not mean that debt-financed spending has low or no fiscal cost. - Higher public sector debt levels can lead to higher real interest rates and lower economic growth rates, forcing the government to run a smaller primary deficit to stabilize the debt ratio. - This will push up the average fiscal cost (AFC) of program spending, defined as the ratio of taxes to program spending. - Marginal fiscal cost (MFC), i.e., the additional taxes imposed to stabilize the debt ratio, can exceed the increase in deficit-financed spending. – The calculations indicate that six of the EA12 countries had an MFC greater than one in 2019. Small increases in the debt ratios or the interest rate-growth rate differentials in Finland, Germany, and Austria would push their MFCs to a value higher than one.