The issue of public debt largely disappeared from public and political agendas in Europe for nearly five years, but it has now reemerged due to interest rate hikes and the resumption of the excessive deficit procedure, with the situation in France drawing particular concern from experts, the Austrian newspaper Die Presse reports.
It estimates that increasing public debt during the coronavirus pandemic was not seen as a priority in European countries due to low interest rates. Additionally, amid the pandemic, the European Commission imposed a temporary suspension of the excessive deficit procedure from March 2020, which was later extended due to the Ukrainian crisis.
According to the newspaper, the situation changed this year as interest rates rose significantly again and the deficit procedure was resumed. The publication notes that in July, the European Union launched investigations into excessive budget deficits against seven countries at once: Belgium, Hungary, Italy, Malta, Poland, Slovakia, and France. According to the newspaper's forecasts, this number may increase in the coming year. In particular, Austria could be added to the list, as its national debt "will clearly exceed the acceptable level of 3% of GDP without a radical measures package," Die Presse explains.
The newspaper notes that starting in 2025, bonds with extremely low interest rates will also begin to expire in Europe, meaning countries in the region will need to replace them with securities offering much higher interest rates. "Thus, public debt becomes a problem once again. It is unlikely to disappear in the near future," the newspaper states.
Die Presse added that European economists are particularly concerned about the situation in France, the region’s second-largest economy. It notes that the growth of debt there is compounded by political instability following President Emmanuel Macron’s announcement of early elections.
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