IMF warns of explosive rise in European public debt by 2040

The International Monetary Fund’s latest study cautions that, without prompt and comprehensive fiscal reforms, many European economies could see public debt climb to an average of 130% of GDP by 2040 – almost double current levels. The IMF projects public spending across the region to rise by about 5% of GDP on average, driven by demographic ageing, the energy transition, higher defence outlays and sluggish growth.

A moderate reform package could cover roughly one‑third of the fiscal gap, mainly through pension system changes and growth‑supporting policies, but most countries would still need fiscal adjustment. The report highlights that piecemeal measures are no longer sufficient. Countries already facing high debt ratios such as the United Kingdom, France and Belgium are singled out, while Austria, Croatia, Belgium, France, Norway, Germany, Slovakia and Turkey are cited as examining deeper spending reforms.

The IMF argues that delaying structural reforms will limit governments’ options and increase the risk of fiscal strain across the continent.