A fiscal squeeze in 2025 will harm Europe’s growth

By Christian Odendahl, European economics editor, The Economist

The European Union does not seem to have a debt problem. At around 84% of GDP, its member countries’ overall public-debt ratio is a lot lower than Britain’s 104% or America’s 123%, let alone Japan’s 255%. Even if the roughly €1trn ($1.1trn) of collective debt—such as the EU bonds funding the bloc’s post-pandemic recovery fund—are included, the ratio does not exceed 90% of GDP. Yet the continent faces a fiscal squeeze in 2025 and beyond that will fuel divisions and cut European growth to almost zero, and may undermine its efforts to step up security spending and continue to support Ukraine.