The combined debt of 32 European countries rose to a record of more than $95 trillion in the first half of 2026, according to the IIF Global Debt Monitor – Special European Edition, a report published by the Institute of International Finance (IIF).
Although the ratio of debt to GDP remains lower than during the eurozone debt crisis, experts warn of mounting fiscal pressure, rising financing costs and political risk in the region’s largest economies.
According to the IIF, Europe’s total debt now accounts for about 25% of global debt. The largest debts are held by France ($15.5 trillion), the United Kingdom ($14.7 trillion), Germany ($13.5 trillion) and Italy ($7.2 trillion). Financial institutions account for the largest share of the debt, followed by nonfinancial corporations, the public sector and households.
IIF analysts stress that the current situation differs from the 2010-2012 crisis. The debt-to-GDP ratio stands at about 325%, more than 45 percentage points lower than at the start of the previous crisis, mainly thanks to years of reducing debt in the banking sector. At the same time, however, government debt remains much higher than it was more than a decade ago.
The state of public finances in Europe’s largest economies is of particular concern.
The IIF notes that in recent years, Romania, Finland and Poland have recorded some of the largest increases in the ratio of public debt to GDP, partly because of higher defense spending. At the same time, many countries, including Poland, are expected to maintain elevated budget deficits in the coming years as well.
The report’s authors say France’s situation remains especially vulnerable. The country recorded the largest increase in debt financing costs among EU states this year, and five-year credit default swap (CDS) contracts on French debt reached their highest level since 2012 and the highest among developed economies. In addition, net debt is growing faster than gross debt, which points to a gradual depletion of the state’s financial buffers. Similar trends are also being observed in Germany and the United Kingdom.
The IIF assesses that politics is becoming an increasingly serious threat to the stability of public finances. In France, social tensions and budget disputes persist ahead of the 2027 presidential election. In Germany, the challenge is financing the expansion of infrastructure and defense spending, while in Spain, Italy and the United Kingdom, housing, pension and welfare issues are adding pressure on public finances.
Experts also point to the heavy dependence of many European governments on foreign investors who finance budget deficits. If global investor sentiment worsens or capital flows out, this could make it harder to refinance debt and lead to higher bond yields.
According to the IIF, Europe does not currently face an immediate risk of a repeat of the debt crisis of a decade ago. However, the combination of record debt, high borrowing needs, rising debt-servicing costs, political tensions and increased spending on defense and social goals could become a source of new strains in European financial markets in the coming years. (Source: PAP Biznes)
