Despite a slight decrease last year, state debts within the Eurozone continue to loom large, constituting a significant portion of the region’s economic output. According to Eurostat, in 2022, these debts collectively amounted to 90.8 percent of the gross domestic product (GDP), down from 90.8 percent the previous year.

The surge in state debts observed in recent years can be primarily attributed to the unprecedented borrowing undertaken by governments to finance various relief measures in response to the COVID-19 pandemic. In 2020 and 2021, state debts soared to 97.2 percent and 94.8 percent of GDP, respectively, reflecting the substantial fiscal efforts to combat the economic fallout from the crisis. Moreover, external factors such as the energy crisis and the conflict in Ukraine have further exacerbated fiscal pressures, contributing to the mounting debt burdens.

These levels of indebtedness significantly exceed the targets set by EU member states in 1997, when an agreement stipulated a maximum debt threshold of 60 percent of GDP. However, the exigencies of the COVID-19 pandemic prompted a suspension of these fiscal rules to enable governments to provide extensive support measures.

As Eurozone economies continue to grapple with the lingering effects of the pandemic and other challenges, addressing the issue of high state debts remains a pressing concern. The path towards fiscal sustainability will likely require a delicate balance between supporting economic recovery and implementing prudent fiscal policies to gradually reduce debt levels over time.