US public debt surpasses $40 trillion, impacting European markets

The United States' public debt has surpassed $40 trillion, creating ripple effects that threaten the stability of the European economy. As Washington issues more bonds to fund its deficit, investors are demanding higher yields, which forces European nations to offer more attractive terms to compete for global capital.

This shift is already visible in bond markets. The yield on the 10-year German bond has reached its highest level since 2011, while the 30-year US Treasury yield has hit a 19-year high. These rising yields increase the cost of government borrowing, which eventually translates to higher interest rates for consumer mortgages, personal loans, and business financing.

European governments face a difficult period as they attempt to fund defense spending, pension obligations, and the green transition amidst rising debt levels. Eurozone public debt has grown from approximately 66% of GDP in 2007 to nearly 88%. Furthermore, energy pressures and geopolitical conflicts have contributed to inflationary trends, prompting the European Central Bank to raise interest rates, with further increases potentially on the horizon.