How far will the public debt in the euro area increase?

Public finances in the euro area are likely to deteriorate further in the coming years. This is because yields on government debt have risen significantly in recent years, so that more and more old debt will have to be refinanced at higher interest rates.

We have calculated how much interest payments will rise in the four largest countries in the currency union in the coming years and how far debt-to-GDP levels will rise. To do this, we have made assumptions about the development of primary deficits, interest rates, economic growth, and inflation in Germany, Italy, France, and Spain.

Debt hits record highs in several countries

The calculations show that the debt levels of Germany, France, and Italy are likely to rise significantly over the next ten years (Chart 1). While Germany's sovereign debt in relation to gross domestic product will be rising to a somewhat elevated level of 93% in 2035, France's debt ratio is expected to rise to 146% and Italy's to 154%. Notably, the indebtedness of France will rise much faster than that of Italy. In Spain, the debt ratio is likely to remain largely unchanged over the next five years and will only increase moderately between 2030 and 2035.

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