A return of public debt to pre-crisis levels is clearly not possible by 2035 for most Eurozone countries. This is the conclusion of the latest study by Euler Hermes, global leader in trade credit insurance and part of Allianz.
According to the economists, it will take Spain 89 years, France 67 years and Italy 26 years to return to its pre-Covid-19 debt levels. In contrast, Germany and the Netherlands will need only seven years to return to their pre-crisis debt levels, according to Euler Hermes. For Belgium, the trade credit insurer expects 2031.
Eurozone debt dynamics in Euler Hermes scenario (% GDP)
The massive government support measures following the coronavirus crisis have triggered a significant deterioration of public finances across the Eurozone in 2020. With great disparities between countries: seven countries (Greece, Italy, Portugal, Spain, Cyprus, France and Belgium) now have debt ratios close to or above 120% of GDP. This is double the Maastricht stability criterion.
Change in government debt (% GDP) 2020 vs. 2019 for selected Eurozone countries
Unless the heavyweights of the Eurozone achieve significant increases in GDP growth, a return to pre-crisis debt levels over the next 15 years is clearly not an option, according to Euler Hermes.