Debt Matters, But The Euro Area May Create The Next Crisis

A new analysis argues that the next major debt crisis in Europe could stem more from euro-area hidden fiscal liabilities than from the United States. While the U.S. has an estimated $95 trillion in Social Security and Medicare financing gaps over 75 years, the article says eurozone pension obligations are even larger: net accrued public-pension liabilities are estimated at about 150% of GDP, and gross pension promises around 371% of GDP, excluding additional pressures from health and long-term care. It adds that political “denial” prevents spending cuts, notes that France’s bond yields are higher than Italy’s, and cites negative real returns on euro-area sovereign assets since 2021.