Since 2020, public debt has expanded markedly as governments have responded to successive crises. By mid-2024, the EU’s debt-to-GDP ratio had climbed to 81.5 %, approximately 4 percentage points above its 2019 level. However, this aggregate figure conceals notable disparities across Member States. Countries such as Greece, Cyprus and Portugal achieved significant reductions in their debt levels, while others with initially lower debt burdens – such as Czechia, Estonia, Romania, and Finland – saw substantial increases.
A shift in fiscal policy is under way, heralding substantial adjustments under the new fiscal framework. Currently, 17 out of 27 Member States exceed the framework’s debt and deficit thresholds. The EU’s aggregate deficit is projected to reach 3.1 % of GDP in 2024, dipping below the 3 % limit by 2026. The 2024 reduction reflects a combination of discretionary budgetary restraint and revenue gains, even as subdued economic activity and rising interest costs exert upward pressure on deficits.
The Financial Stability Review by the European Central Bank (ECB) warns that high sovereign debt levels, combined with rising interest costs and policy uncertainty, heighten debt sustainability concerns by limiting fiscal flexibility and straining euro-area finances. Timely, growth-friendly fiscal consolidation under the revised EU governance framework is essential to balance debt reduction with investments, and mitigate economic vulnerabilities.
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