{"id":128583,"date":"2025-10-17T18:37:10","date_gmt":"2025-10-17T18:37:10","guid":{"rendered":"https:\/\/www.europesays.com\/ie\/128583\/"},"modified":"2025-10-17T18:37:10","modified_gmt":"2025-10-17T18:37:10","slug":"debt-in-several-eu-countries-is-on-potentially-explosive-path-imf-warns-the-irish-times","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/ie\/128583\/","title":{"rendered":"Debt in several EU countries is on potentially explosive path, IMF warns \u2013 The Irish Times"},"content":{"rendered":"

Europe could soon be engulfed in another sovereign debt crisis, unless it adopts \u201cbold\u201d policy responses, the International Monetary Fund<\/a> (IMF) has warned.<\/p>\n

In a report on Europe\u2019s economy, the Washington-based fund also said the euro zone \u2013 while avoiding a \u201cdeep growth shock\u201d from recent crises \u2013 had converged on a low growth path and that the impact of US tariffs was now beginning to \u201cbite\u201d. <\/p>\n

It warned that public spending pressures in several countries had put debt on a potentially \u201cexplosive path\u201d.<\/p>\n

\u201cElevated public debt, an increasingly difficult financing environment and new spending pressures are creating a fundamental sustainability challenge at a time when countries face political polarisation, dissatisfaction with cost of living and reform fatigue,\u201d it warned.<\/p>\n

Over a 15-year horizon, and with no growth reforms, no fiscal consolidation and no change in public programmes, debt for the average European country would reach 130 per cent of GDP (gross national product) by 2040, it said.<\/p>\n

\u201cThis is roughly a doubling from today\u2019s level, which would endanger debt sustainability,\u201d it said. The debt surge could be even steeper if interest rates increase.<\/p>\n

[\u00a0Ireland forecast to be fastest growing economy in 2025Opens in new window<\/a>\u00a0]<\/p>\n

\u201cAddressing Europe\u2019s fiscal needs requires a comprehensive policy package combining growth-boosting reforms, medium-term consolidation and, depending on circumstances, substantive fiscal reforms possibly involving difficult trade-offs,\u201d the IMF said.<\/p>\n

Both France and the UK have spiralling public debt and big budgetary gaps and face populist backlashes against proposed reforms.<\/p>\n

\u201cThe next financial crisis is definitely coming … and it will be a sovereign debt crisis,\u201d German chancellor Friedrich Merz said recently. <\/p>\n

\"\"Dublin Bus CEO on recruitment challenges, going electric, and stamping out anti-social behaviour <\/p>\n

In its report, released to coincide with the IMF and World Bank autumn meetings in Washington DC, the IMF said that after weathering several recent shocks, the euro zone economy had now converged on \u201cmediocre\u201d growth pattern which was below the pre-pandemic average.<\/p>\n

\u201cSince 2020, growth rates have zigzagged as shocks (from the pandemic and Russia\u2019s invasion of Ukraine) materialised, and policies responded,\u201d it said.<\/p>\n

[\u00a0Stock market \u2018concentration risk\u2019 now higher than dot-com bubble period, IMF warnsOpens in new window<\/a>\u00a0]<\/p>\n

\u201cA feared deep growth slump was avoided but growth has now settled on an output trajectory well below the pre-Covid-19 trend,\u201d it said. <\/p>\n

The boost to growth seen in the first half of 2025 from the front-loading of exports (a trend it links to Irish pharma exports) is reversing \u201cas tariffs start to bite and bond markets are pricing in elevated risks amid continued uncertainty\u201d, the fund said.<\/p>\n

It warned that the changing global landscape was now weighing on growth with euro zone growth predicted to be in region of 1.2 per cent this year, above the 1 per cent forecast in July, and 1.1 per cent in 2026 \u2013 a downgrade from 1.2 per cent.<\/p>\n

Trade between the United States and the European Union which accounts for almost a third of global goods and services trade and 20 per cent of EU exports, had \u201cbecome more costly\u201d. <\/p>\n

The October 2025 IMF forecast is based on the estimated effective US tariff rate on EU goods following the US\u2013EU trade deal of 16.3 per cent, a rate 4.3 percentage points higher than that anticipated in July and 15 percentage points higher than that in 2024, it said.<\/p>\n","protected":false},"excerpt":{"rendered":"Europe could soon be engulfed in another sovereign debt crisis, unless it adopts \u201cbold\u201d policy responses, the International…\n","protected":false},"author":2,"featured_media":77658,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[174],"tags":[79,179,18,19,16243,17],"class_list":{"0":"post-128583","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-economy","10":"tag-eire","11":"tag-ie","12":"tag-international-monetary-fund","13":"tag-ireland"},"share_on_mastodon":{"url":"","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/128583","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/comments?post=128583"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/128583\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media\/77658"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media?parent=128583"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/categories?post=128583"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/tags?post=128583"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}