Last Updated on November 20, 2025
The EU debt crisis is becoming increasingly difficult to ignore as both deficits and debt levels continue to rise across the eurozone and the wider European Union. According to the latest preliminary data from Eurostat, the eurozone budget deficit remained at 2.7% of GDP in the second quarter of 2025, matching the level recorded in the first three months of the year. Although this marks a slight improvement compared with the 3.1% seen during the same period in 2024, it still hovers just below the European Union’s long-standing deficit ceiling of 3%.
Across the EU as a whole, the deficit reached 2.9% of GDP in the second quarter, marginally higher than the 2.8% recorded earlier in the year. Even with ongoing fiscal efforts and commitments to consolidate public finances, many member states are finding it increasingly difficult to control spending in a challenging economic environment.
Rising Public Debt Adds Pressure
Public debt is also continuing to climb, fueling concerns that the EU debt crisis could intensify in the coming years. The eurozone’s debt increased to 88.2% of GDP between April and June 2025, up from 87.7% in the first quarter. For the EU, the figure rose to 81.9%, compared with 81.5% at the start of the year. Despite repeated reminders that public debt should remain below 60% of GDP as required under EU fiscal rules, fewer and fewer countries are meeting this benchmark.
Final Eurostat data for 2024 confirms this persistent upward trend. By the end of last year, the eurozone’s debt-to-GDP ratio had climbed to 87.1%, up from 87% in 2023, while EU-wide debt reached 80.7%, slightly higher than the previous year. These figures underline a structural challenge: Europe is struggling to stabilize its public finances even in periods of relative economic calm.
Countries Struggling With the Highest Deficits
Some member states are facing particularly severe fiscal imbalances. During the second quarter of 2025, the largest deficits in the EU were recorded in Romania (8.7% of GDP), Poland (8.5%), and France (5.4%). These levels far exceed the EU’s 3% ceiling and will likely trigger closer monitoring under the reactivated Excessive Deficit Procedure. France’s repeated difficulties in meeting fiscal rules highlight deeper structural issues, while Romania and Poland are dealing with heavy social spending, wage growth, and pressure from increased defense commitments.
Surpluses in a Time of Widespread Deficits
Not all EU economies are moving in the wrong direction. A handful of countries continue to demonstrate fiscal discipline, achieving budget surpluses even as the rest of the bloc struggles. Cyprus posted a surplus of 3.6% of GDP, followed by Denmark (2.9%) and Greece (2.7%). Greece’s turnaround is especially notable. Once at the center of Europe’s sovereign debt crisis, Greece has managed to build consistent surpluses through a combination of structural reforms, improved tax collection, and a strong rebound in tourism.
The Most Indebted Nations in Europe
The long-term risks of the EU debt crisis are most evident in the countries with the highest debt-to-GDP ratios. As of June 2025, Greece leads with 151.2%, followed by Italy (138.3%), France (115.8%), Belgium (106.2%), and Spain (103.4%). These economies face a combination of rising interest rates, high structural spending, aging populations, and sluggish productivity growth — all factors that make debt stabilization increasingly challenging.
In contrast, some EU members remain models of fiscal responsibility. Estonia, with debt at just 23.2% of GDP, along with Luxembourg (25.1%), Bulgaria (26.3%), and Denmark (29.7%), maintain some of the lowest public debt levels in the world. Estonia’s fiscal framework is so strict that the country could theoretically repay all of its public debt with a single year of tax revenue.
Why Europe’s Debt Problem Is Growing
While the pandemic initially drove deficits sky-high, the continued deterioration of public finances points to broader, long-term challenges. Europe’s rapidly aging population is straining pension and healthcare systems, pushing governments to increase spending year after year. At the same time, the European Central Bank’s recent interest rate increases have made debt servicing significantly more expensive, ending the era of near-free government borrowing.
Defense spending has also surged following Russia’s invasion of Ukraine. Germany alone has created a €100-billion defense fund, while Central and Eastern European countries are undertaking their largest military expansions since the Cold War. Meanwhile, the EU’s ambitious climate, energy, and digital transformation goals require massive investment — commitments that are increasingly difficult to finance without borrowing.
Another challenge is Europe’s slower economic growth compared with other major regions. Between 2010 and 2024, EU GDP grew at an average rate of 1.1%, less than half the 2.4% growth recorded in the United States. Weak growth makes it harder for governments to reduce debt ratios even when they freeze or cut spending.
What the EU Plans for the Future
To prevent the EU debt crisis from worsening, policymakers are revising the bloc’s fiscal framework. The modernized fiscal rules now require member states to negotiate individualized debt-reduction plans with the European Commission, allowing for a more flexible approach that takes national economic realities into account. Another major discussion is the potential creation of a permanent EU-level fiscal capacity — a step toward a more integrated financial system similar to a eurozone treasury. This follows the success of the temporary €750-billion NextGenerationEU fund launched during the pandemic.
Some forms of “productive spending,” such as investments in green energy, defense research, industrial innovation, and digital infrastructure, may receive more favorable treatment under the new rules. At the same time, member states are encouraged to implement structural reforms aimed at boosting productivity, improving labor mobility, and attracting private investment to stimulate long-term growth.
A Critical Moment for Europe’s Fiscal Future
Europe is entering a decisive phase. The combination of rising deficits, increasing public debt, higher interest rates, and geopolitical pressures is creating a perfect storm that heightens the risks surrounding the EU debt crisis. Some countries continue to maintain strong finances and solid growth prospects, but others are drifting further away from the EU’s fiscal goals. What happens over the next few years — especially regarding reforms, investment strategies, and cooperation at the EU level — will determine whether Europe can stabilize its finances or face deeper economic challenges ahead.
FAQ: EU Debt Crisis
What is causing the EU debt crisis?
The EU debt crisis is largely driven by persistent budget deficits, rising public debt, aging populations, increased defense spending, higher interest rates, and slow economic growth across the region.
Which EU countries have the highest public debt?
As of mid-2025, the countries with the highest debt-to-GDP ratios are Greece (151.2%), Italy (138.3%), France (115.8%), Belgium (106.2%), and Spain (103.4%).
Is the eurozone meeting the EU deficit rules?
Most eurozone countries are close to or exceeding the 3% deficit limit, with Romania, Poland, and France showing some of the largest deviations.
Why is Europe’s debt rising despite economic recovery?
A combination of structural issues–including healthcare and pension costs, post-pandemic spending, and large-scale investments for the green and digital transition–is keeping public debt elevated.
What measures is the EU taking to control debt levels?
The EU is modernizing its fiscal rules, asking countries to negotiate tailored debt-reduction plans, and exploring the creation of a permanent EU-level fiscal capacity to support long-term investments.
Will the EU debt crisis affect economic growth?
Yes. High debt limits government spending, increases borrowing costs, reduces investor confidence, and may restrict the EU’s ability to respond to future crises.
Which countries still maintain strong finances?
Estonia, Luxembourg, Bulgaria, and Denmark retain some of the lowest debt levels in the EU, thanks to conservative fiscal policies and strong economic fundamentals.
Could the EU face another sovereign debt crisis like in 2010?
While today’s conditions differ—thanks to stronger institutions and more flexible fiscal rules—persistent high debt and slow economic growth could increase the risk of financial instability over time.
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