Excessive levels of debt create vulnerabilities, hinder the ability of households and enterprises to increase their consumption and investment and governments to cushion adverse shocks.

High levels of public indebtedness were a key driver of the EU sovereign debt crisis and one reason why the recovery of the real economy has been so slow. This sovereign debt crisis has highlighted the importance of reducing public debt levels and building up sufficient buffers during normal and good times.

The Covid-19 crisis occurred while the level of public debt was already problematic.

The economic consequences of the Current Covid-19 crisis have worsened this situation. According to statistics issued by the IIF global debt, encouraged by the very accommodative monetary policies of recent years, reached a record high of 360% of GDP in June 2021, up from 320% in 2019 and 200% in 2011. Such a level of public debt may exceed the limits of sustainability in many EU countries and raises fundamental questions: Who will pay? Will the markets never question the solvency of States? What is going to happen to the euro zone, where the heterogeneity of deficits and public debt is increasing?

Moving away from the debt-driven growth model of the last decades is essential for the global economy to recover from the crisis. Only domestic structural reforms can resolve structural issues and increase productivity and growth.