The consolidation of Eurozone public finances has made good progress in recent years, with the average fiscal deficit falling to a record low in 2018. But the legacy of the European debt crisis still looms large. Many Eurozone member states continue to sit on high mountains of debt, the consolidation of which is likely to be a slow and drawn-out process. Our calculations show that by 2033, of the three EMU heavyweights and the four former crisis countries, only Germany and Ireland will comply with the 60% debt criterion. Spain and Portugal will make good progress over the next 15 years, and in France the trend is going in the right direction. Greece and Italy, however, will still boast debt levels of well above 100% of economic output in 2033. Even to achieve these consolidation results most countries will have to display more fiscal discipline because the prevailing low interest rate environment will only partially compensate for slowing economic growth and lower primary balances. In the long-term, this is hardly a sustainable strategy to reduce government debt in the Eurozone.
Our interactive DEBT TOOL allows for the simulation of debt ratio trends in selected Eurozone countries by applying alternative assumptions, and the comparison of the figures with our forecasts.
