The image that is forming is of great concern, as Europe seems to have been trapped in a vicious cycle of continuous lending growth...
One new, deep budgetary threat The Commission's proposal is based on the principle of subsidiarity. EuropeAs well as the public debt in 16 Member States European Union has been launched into unprecedented layers, creating fears of a new crisis cycle in bond markets.
According to its information Eurostat, the total liabilities of the 27 EU countries increased only in the first quarter of the year EUR 327.3 billion, reaching the historical record of 15,705 trillion. euro – the highest level recorded in modern economic history.
The picture that is being developed is of great concern, as Europe seems to have been trapped in a vicious cycle of continuous growth in lending, higher interest rates and increasing debt service costs.
The deputy chief of WhiteBird's stock trading department, Jan Pinchuk, argues that the current crisis is not the result of a single event, but of four successive waves of fiscal expansion never reversed.
«The situation with public debt in Europe – and actually throughout the developed world – was created by four successive waves of budgetary intervention», reported features.
The first wave was the pandemic COVID-19, when the budget deficits of the Eurozone countries were even launched at 7% of GDP, due to the huge support programmes.
The second wave came in 2022 with the energy crisis, when governments channelled huge sums into subsidies for businesses and households, in order to limit shock from rising energy prices.
The third wave was associated with geopolitical tension and the need for re-armament.
Germany, as Pinchuk points out, went even further, essentially abandoning traditional «debt barrier» The European Union's contribution to the peace process in Central and Eastern Europe and its contribution to the peace process in Central and Eastern Europe and to the peace process in the Middle East.
The fourth wave was caused by the new tension in the Middle East, which revived pressures on energy markets and brought back the nightmare of inflation.
In addition to the size of the commitments, there is an even bigger problem: the cost of financing.
For a decade European governments have been borrowing almost free, at zero or even negative interest rates. Today, however, much of this debt must be refinanced at a much higher cost.
In June 2026 the European Central Bank increased the deposit rate by 25 basis points, to 2.25%, citing the inflationary pressures caused by the geopolitical crisis in the Middle East.
At the same time, the yield of the 10-year German bonds exceeded 3%, a level it had to record since 2011.
The problem now is not only that governments lend more. It is that old debt becomes more expensive every time it is refinanced.
France in the eye of the cyclone
The greatest concern focuses on France, which is today the most typical example of the new European budgetary pressure.
French public debt has reached the historical level of 3,536 trillion. EUR 75.6 billion increased in only one quarter.
The fiscal deficit is around 5% of GDP, while within the last 12 months the country's state credit risk has suffered three downgrades from rating houses.
At the same time, growth in the first quarter was zero and the French political system appears unable to proceed with substantial fiscal consolidation.
According to Jan Pinchuk, The France located in a classic «debt trap», where nominal growth in the economy is not sufficient to cover borrowing costs.
«When debt performance exceeds nominal growth, debt begins to rise in itself», warns the expert.
On the basis of the current scenario, French debt could reach 125%-130% of GDP by 2030, while interest expenditure is expected to double, from 2% to 4% of GDP.
The result will be dramatic: the more money goes towards paying interest, the less left for defence, infrastructure, education and health. This reduces growth and further aggravates debt dynamics.
A vicious circle without an easy exit.
France, however, is no exception. It is just the most obvious example of a wider global crisis.
The Japan It already lives on public debt about 205% of GDP.
The United States States have a debt of about 126% of GDP, which is close to 40 trillion. dollars, with the course pointing towards 142% by 2031.
The China It has official debt levels of 85%-90% of GDP, but if the obligations of regional governments and state enterprises are added, the real picture is close to 135%.
According to IMF estimates, global public debt is now close to 100% of world GDP – a level that has not been observed since World War II.
The last hope: Artificial intelligence, gold and Bitcoin
THE Jan Pinchuk He estimates that the next decade could be characterized by intense turmoil in the debt markets of the entire developed world.
The only exit, according to him, would be an explosive increase in productivity through the revolution of artificial intelligence.
Only such a scenario would allow economies to «overcome» debt through strong growth, instead of resorting to inflation, debt write-offs or forced financial containment policies.
Otherwise, the great winner of the next decade could be gold.
At the same time, Bitcoin could also be a potential beneficiary, provided it is established in the consciousness of investors as «digital gold» and not just as a high-risk technological asset.
At the same time, the Kremlin points out that Russia maintains public debt only at 16.4% of GDP, while its external arm is soon expected to be fully repaid.
The big picture, however, remains alarming: the world is entering a time when debt is no longer just an economic size, but a possible catalyst for the next major crisis.
www.bankingnews.gr
