Public debt in the eurozone is forecast to reach 102% of GDP in 2020. That’s a hefty surge in government indebtedness compared to 2019, when the euro area’s debt-to-GDP ratio was 86%. Even 2019’s chunky debt ratio was in breach of eurozone rules, which stipulate that government debt is not supposed to exceed 60% of GDP.

Are we all going to have to learn to live with higher debt? Goldman Sachs predicts Italian debt will top 160% of GDP in 2020 (significantly above the 135% ratio Italy had settled at in the wake of the European sovereign debt crisis). Outside Europe, debt ratios are even higher, with Japan’s debt-to-GDP ratio predicted by Fitch Ratings to soar to “well above 240%”.

After the 2007-2008 financial crisis, many governments instituted programmes of so-called “austerity”, which meant cutting public services and government expenditure. However, Europeans may not have much appetite for a fresh round of austerity.

According to some economists, tax rises could be one solution. Others, however, argue that (so long as interest rates stay low and debt interest payments are manageable) it may be possible to grow Europe’s economy faster than its debt.

How will we pay off our coronavirus debt? Is Europe headed for another round of austerity? Or will we learn to live with higher public debt? Let us know your thoughts and comments in the form below and we’ll take them to policymakers and experts for their reactions!

IMAGE CREDITS: Photo by Ehud Neuhaus on Unsplash


10 comments Post a commentcomment

What do YOU think?

  1. avatar
    EU Reform Proactive

    If bankers would be real magicians- creating money out of thin air- one could assume they also can make debt disappear back where it came from- thin air?

    Not so- say some economists! Only new taxes & tax increases will repay debt made by politicians on our behalf. Around 2058 or in 38 years (more than a generation) to be repaid- if things work out. Should more disasters strike during the 38 years or the EU morphs into a different animal- than what? Nobody’s concern at the moment. There is plenty more of thin air to harvest!

    https://www.ft.com/content/2b69c9c4-2ea4-4635-9d8a-1b67852c0322

    Actually, “they” are pretty sure and have already worked it out for us- the “we”. Why ask us again? Out of politeness?

    Thank you very much for forcing us & our grandchildren into an ever-increasing debt burden and ever closer dependency to all banksters & EU policymakers.

    PS: not to forget please, also invite all Royals & Nobel’s to jump on the pc equality bandwagon- equal tax for all!

    Especially the Spanish Royals who’s dishonesty made them seek the closeness of Arab princes & special treatment. Many other Royals had to learn to adjust after losing their royal-ness after WWI- why not all equally? What an unequal world we live in & no treaty to fix that!

    https://nomoretax.eu/kings-presidents-pay-more-tax/

  2. avatar
    Craig

    The real killer is that this debt is highly unevenly spread: southern Europe and France have over 120% debt-to-GDP. Can southern Europe realistically “outgrow” its debt given its chronically weak competitiveness and catastrophic demographics (low fertility, significant emigration, especially brain drain)?
    So long as the ECB de facto buys up/guarantees government debt – possibly in violation of its mandate – then there’s no rush to pay this stuff off and default can be avoided. Defaults of major nations – Italy in particular – would be devastatingly destabilizing for the Eurozone economy. Germany seems to have come to accept this. If interest rates are reasonably low, one would have indefinite time to slowly pay it off, as was occurring before the crisis. At least until the next crisis..

  3. avatar
    Georgios

    Who gave the loans ? Public.Who must be repaid ? public.So all is settle d from the first moment

  4. avatar
    Julia

    The banks must be happy now. Many countries were balancing their budgets to avoid conditional loans that harm their citizens until Covid-19.

  5. avatar
    Yvonne

    I’m not an economist..but it would be nice to think that it would just be written down by the financial adjusters!! but no doubt we will be expected to pay it off..allbe it..very slowly..and as the economys get going again and start making money again ..in 5 to 10 years from now..we should have paid off a sizable amount if not all of this current debt..hopefully!!..but each countries economy is different..anywayhopefully austerity measures will not be as bad as in 2010..please god !! 😃

  6. avatar
    Ana

    Starting by (re)introducing strict rules in the predatory financial “market” to stop the bleeding from the pockets of almost all of us to the huge pockets of a very few.

  7. avatar
    Dan

    Well if your economic basket cases like France,Spain or Italy it’s easy,you just demand that other more sane and fiscal nations pay of your debts for you.
    Honestly you couldn’t make this stuff up, you really couldn’t.

  8. avatar
    MM Wijck van

    Zeekreek. . August 26th, 2020 .
    Defining the corona-disease as less epidemical than the definition “catastrophical”
    should demand, it could be adapted to insurance competent terms.

  9. avatar
    Γεώργιος

    Who gave the loans ? Public.Who must be repaid ? public.So all is settle d from the first moment

  10. avatar
    Alice

    Make sure that billionaires pay off their debt to society to begin with instead of exploiting vulnerable workers and their attempts to force a “return to normal”.
    No dumb fines to get out of it, no payouts to them, make THEM pay instead of the healthcare workers, construction workers, everyone who’s unnecessarily suffered for this crisis.

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