Excessive levels of debt create vulnerabilities, hinder the ability of households and enterprises to increase their consumption and investment and governments to cushion adverse shocks.
High levels of public indebtedness were a key driver of the EU sovereign debt crisis and one reason why the recovery of the real economy has been so slow. This sovereign debt crisis has highlighted the importance of reducing public debt levels and building up sufficient buffers during normal and good times.
The Covid-19 crisis occurred while the level of public debt was already problematic.
The economic consequences of the Current Covid-19 crisis have worsened this situation. According to statistics issued by the IIF global debt, encouraged by the very accommodative monetary policies of recent years, reached a record high of 360% of GDP in June 2021, up from 320% in 2019 and 200% in 2011. Such a level of public debt may exceed the limits of sustainability in many EU countries and raises fundamental questions: Who will pay? Will the markets never question the solvency of States? What is going to happen to the euro zone, where the heterogeneity of deficits and public debt is increasing?
Moving away from the debt-driven growth model of the last decades is essential for the global economy to recover from the crisis. Only domestic structural reforms can resolve structural issues and increase productivity and growth.
Contributions to the policy debate
Extracted from the main Eurofi publications (Regulatory Updates, Views Magazines and Conference Summaries)
Financial stability risks in Europe with high inflation and indebtedness - Prague Financial Forum - September 2022
Vulnerabilities from non-bank financing intermediation - Prague Financial Forum - September 2022
Ensuring EU growth and financial stability with over public indebtedness - Paris High Level Seminar - February 2022
Over-indebtedness: way forward - Ljubljana Financial Forum - September 2021
The reform of the EU fiscal framework and the transition for its re-implementation - Lisbon Virtual Seminar - April 2021
Way forward to address unsustainable sovereign debt in the EU - Berlin Financial Forum - September 2020
Sustainability of EU debts - Bucharest High Level Seminar - April 2019
Public and private
Financial stability risks with high inflation and indebtedness - September 2022
Madis Müller - National Bank of Estonia | Gerry Cross - Central Bank of Ireland | Sylvain Broyer - Chief Economist S&P Global Ratings Europe Ltd. | Geert Wijnhoven - ING Group
Vulnerabilties from non-bank financial intermediation - September 2022
Martin Moloney - International Organization of Securities Commissions | Jérôme Reboul - Autorité des Marchés Financiers | Sarah Pritchard - Financial Conduct Authority | Derville Rowland - Central Bank of Ireland | Andy Blocker - Invesco | Ann Prendergast - State Street Global Advisors Europe Limited | Dennis Gepp - Federated Hermes, UK, LLP
Over-public indebtedness challenges for growth and stability - February 2022
Sylvie Goulard - Banque de France | Edward Scicluna - Central Bank of Malta | Declan Costello - European Commission | Sarah Carlson - Moody’s Investors Service | Pier Carlo Padoan - UniCredit S.p.A.
Over-indebtedness: way forward - September 2021
Markus Ferber - European Parliament | Gediminas Šimkus - Bank of Lithuania | Jukka Vesala - Nordea Bank Abp | Marie Diron - Moody’s Investors Service | Jean-Jacques Bonnaud - Eurofi | Declan Costello - European Commission
Way forward to address unsustainable sovereign debt in the EU - September 2020
Mário Centeno - Banco de Portugal | Vitas Vasiliauskas - Bank of Lithuania | Andreas Dombret - Oliver Wyman & Member of the Board of the Bundesbank from 2010 to 2018 | Alastair Wilson - Moody’s Investors Service | Christian Noyer - Banque de France | Christian Keller - Barclays | Pedro Marques - European Parliament | Jerome Haegeli - Swiss Re | Dino Kos - CLS