Public debt levels remain high in several major EU economies. In France, public debt stands at around 118% of GDP, while in Italy it exceeds 138%. By 2028, both countries would end up paying around 2.7% and 4.3% of their respective GDP’s solely in interest. If nothing is done, the average debt level of EU Member States could reach 130% of GDP by 2040 according to the IMF. In contrast, Germany maintains today a significantly lower ratio, close to 63% of GDP. These divergences highlight the growing heterogeneities within the euro area and raise the question of long-term resilience.

Two main factors explain the high level of indebtedness. First, persistent low interest rates set by the ECB as well as the monetisation of debt incentivised countries to borrow above reasonable levels. Secondly, the Growth and Stability Pact failed to keep Member States in check due to it being blatantly and repeatedly disregarded without any consequence.

Excessive public debt is the cause of many vulnerabilities. Countries with high debt levels are home to the highest unemployment rates. The cost of high indebtedness is also borne by households and businesses. As debt rises, governments raise fiscal pressure in order to meet debt-servicing obligations. Higher taxation and constrained public finances directly affect purchasing power and reduce the capacity of firms to invest, innovate and expand. Over time, this weakens economic competitiveness and discourages productive investment due to economic actors seeking higher returns elsewhere.

High levels of debt also reduce a government’s fiscal room for manoeuvre. When public finances are already stretched, States have fewer options to respond to economic shocks, financial crises or geopolitical disruptions.

It is therefore essential to move away from a demand-based model propped up by debt, excessive public spending, and easy ECB money, and instead move towards a supply-oriented framework. So, restoring sustainable national public finances is a key condition for relaunching productive investment and returning to the path of economic convergence, the sole credible path of European integration.