Europe faces a new, deep fiscal threat as public debt in 16 member states of the European Union has skyrocketed to unprecedented levels, raising fears of a new cycle of crisis in the bond markets.
According to data from Eurostat, the total liabilities of the 27 countries of the EU increased in the first quarter of the year alone by €327.3 billion, reaching the historical record of €15.705 trillion, the highest level recorded in modern economic history.
The picture taking shape causes intense concern, as Europe seems trapped in a vicious cycle of continuously increasing borrowing, higher interest rates, and rising debt servicing costs.
The deputy head of stock trading at WhiteBird, Jan Pinchuk, argues that today's crisis is not the result of a single event, but four consecutive waves of fiscal expansion that were never reversed.
«The public debt situation in Europe, and in fact across the entire developed world, was created by four consecutive waves of fiscal interventions», he stated characteristically.
The first wave was the COVID-19 pandemic, when fiscal deficits of Eurozone countries skyrocketed even to 7% of GDP due to massive support programs.
The second wave came in 2022 with the energy crisis, when governments funneled huge amounts into subsidies for businesses and households in order to limit the shock from rising energy prices.
The third wave was linked to geopolitical tension and the need for rearmament.
Germany, as Pinchuk points out, went even further, essentially abandoning its traditional «debt brake» and entering the markets with a mammoth borrowing program of approximately €512 billion for infrastructure and defense.
The fourth wave was caused by the new tension in the Middle East, which reignited pressure on energy markets and brought back the nightmare of inflation.
Beyond the size of liabilities, however, there is an even larger problem: the cost of financing.
For a decade, European governments were borrowing almost for free, with zero or even negative interest rates. Today, however, a large part 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 inflationary pressures caused by the geopolitical crisis in the Middle East.
At the same time, the yield on 10 year German bonds exceeded 3%, a level not recorded since 2011.
The problem now is not only that governments borrow more. It is that old debt also becomes more expensive every time it is refinanced.
France in the eye of the storm
The greatest concern is focused on France, which today represents the most characteristic example of the new European fiscal pressure.
French public debt has reached the historical level of €3.536 trillion, up by €75.6 billion in just one quarter.
The fiscal deficit stands at approximately 5% of GDP, while in the last 12 months the country's sovereign credit risk has suffered three downgrades by rating agencies.
At the same time, growth in the first quarter was zero and the French political system appears incapable of proceeding with substantial fiscal consolidation.
According to Jan Pinchuk, France is in a classic «debt trap», where the nominal growth of the economy is insufficient to cover borrowing costs.
«When the yield on debt exceeds the nominal growth of the economy, debt begins to increase on its own», warns the expert.
Based on today's 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 directed to interest payments, the less remains for defense, infrastructure, education, and health. This limits growth and further worsens debt dynamics.
A vicious cycle with no easy way out.
France, however, is no exception. It is simply the most visible example of a broader global crisis.
Japan already lives with public debt at approximately 205% of GDP.
The United States has debt at approximately 126% of GDP, close to $40 trillion, with the trajectory pointing toward 142% by 2031.
China officially displays debt levels of 85%-90% of GDP, but if the liabilities of regional governments and state enterprises are added, the real picture approaches 135%.
According to estimates by the IMF, global public debt is now approaching 100% of global GDP, a level not observed since the era of World War II.
The last hope: Artificial intelligence, gold, and Bitcoin
Jan Pinchuk estimates that the next decade could be characterized by intense turmoil in the debt markets of the entire developed world.
The only way out, according to him, would be an explosive increase in productivity through the revolution of artificial intelligence.
Only such a scenario would allow economies to «outgrow» debt through strong growth, instead of resorting to inflation, debt write offs, or coercive financial repression policies.
Otherwise, the big winner of the next decade could be gold.
At the same time, a potential beneficiary could also be Bitcoin, provided that it establishes itself in the minds of investors as «digital gold» and not merely as a high risk technology asset.
At the same time, the Kremlin highlights that Russia maintains public debt at just 16.4% of GDP, while its external component is expected soon to be fully repaid.
The big picture, however, remains worrying: the world is entering an era where debt is no longer just an economic figure, but a potential catalyst for the next major crisis.
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