Eurozone government debt climbs to 88.8% of GDP as Italy closes in on Greece

The debt-to-GDP ratio measures what a government owes against the economic output produced by its country. It is expressed as a percentage. A higher ratio means debt is larger compared with the economy that supports government finances. The measure helps compare countries of different sizes.

For example, eurozone government debt reached 88.8% of combined GDP in the second quarter of 2026. This means the governments’ debt equaled nearly nine-tenths of one year’s economic output. It does not mean governments must repay all the debt within one year. Instead, it provides a common way to judge debt’s scale.

The ratio matters because a growing economy can make existing debt easier to manage, while weak growth can make it heavier. Eurozone debt rose from 87.3% a year earlier. EU rules set 60% of GDP as the debt reference limit, so current levels are substantially higher.

Eurozone government debt reached 88.8% of combined GDP between April and June 2026. In cash terms, governments owed about €14.4 trillion. The ratio shows debt relative to economic output, making it more useful for comparisons than a raw euro amount alone.

The European Union’s rules say government debt should not exceed 60% of GDP. The eurozone’s current ratio therefore stands 28.8 percentage points above that reference level. The wider EU recorded a lower, but still elevated, ratio of 82.9% in the same quarter. Both figures had increased from a year earlier.

The scale reflects debt remaining high after the COVID-19 pandemic. EU debt peaked at 89.5% of GDP in 2020 and has stayed above 80% since then. For the eurozone, the comparable full-year ratio rose to 87.7% in 2025, although that figure covered 20 countries using the euro last year.

Greece had the highest government debt ratio in the European Union, at 140.8% of GDP in the second quarter of 2026. Italy ranked second at 139.9%. France followed at 119.1%, while Belgium and Spain also remained above 100%, at 110.2% and 101.4%.

Italy and Greece were separated by less than one percentage point. More precisely, Greece’s ratio was only 0.9 percentage points higher. That is a striking change from 2022, when Greece stood at 177.8% and Italy at 138.4%. Greece has since reduced its ratio, while Italy’s has moved higher.

The rest of the EU showed a wide spread. Estonia had the lowest ratio, at 26.1%, followed by Denmark and Luxembourg. Poland recorded the sharpest annual increase, rising 6.7 percentage points. Last year, 12 member states exceeded the EU’s 60% debt ceiling.

Greece’s debt-to-GDP ratio fell because the country was running budget surpluses. Its ratio dropped by 11.2 percentage points in one year, reaching 140.8% in the second quarter. A surplus means the government’s budget position is helping reduce debt relative to the economy, although the article does not detail every factor behind the decline.

Italy moved in the opposite direction. Its debt ratio rose by 1.3 percentage points in the second quarter alone, reaching 139.9%. Because Italy’s debt increased while Greece’s ratio fell, the countries became almost level. In 2022, Greece’s ratio was 177.8%, compared with Italy’s 138.4%.

The result is a dramatic narrowing of the gap between the two countries. Greece still ranked as the most indebted EU member, but Italy was only 0.9 percentage points behind. Future movements will depend on changes in debt, economic output, and government budget balances.

Investors demanded more than 5% to hold France’s 10-year government bonds because they wanted greater compensation for lending to France. The article links the higher yield to concerns surrounding France’s rising debt and large deficit. A yield is the return investors seek when buying government debt.

France’s debt reached 119.1% of GDP, up 3.7 percentage points in a year. Its deficit was 5.1% of GDP last year, the fourth-largest in the EU. A divided parliament was debating a 2027 budget that aims to reduce the deficit to 5%, while Prime Minister Sébastien Lecornu lacked a majority for his spending cuts.

The 10-year yield rose above 5% for the first time since 2002. Moody’s was due to review France’s credit rating, and most economists expected a downgrade. The article says that could push borrowing costs even higher, adding pressure to France’s finances.

When borrowing costs rise, a government generally pays more interest on new loans and on existing debt that must be refinanced. Interest payments are part of the budget, so extra costs can reduce the money available for public services, investment, or tax cuts. The effect is usually gradual rather than immediate.

France illustrates the pressure. Its 10-year government bond yield rose above 5%, while its debt reached 119.1% of GDP and its deficit was 5.1% last year. If France borrows or replaces maturing debt at higher rates, future interest bills can increase. The article does not give a forecast for the size of that increase.

Higher interest costs can also make it harder to reduce a deficit. The government may need spending cuts, higher taxes, or more borrowing. More borrowing can add to debt, potentially increasing investor concerns further. France’s expected credit-rating review could push borrowing costs higher still, according to the article.

Governments commonly borrow by issuing bonds or other debt securities. Investors buy them, providing money upfront, while the government promises interest payments and repayment later. Governments borrow to cover budget deficits, fund spending, or refinance maturing debt. The article focuses on the resulting debt levels, not the detailed mechanics of issuance.

Debt can grow faster than the economy when a government repeatedly runs deficits, meaning it spends more than it receives. Interest adds to the amount that must be financed. If new borrowing and accumulated interest rise faster than GDP, the debt-to-GDP ratio increases. A falling or weak economy can also raise the ratio even without a large increase in debt.

The article provides current examples. Eurozone debt rose to 88.8% of GDP, while Italy’s ratio increased to 139.9%. France’s borrowing costs topped 5%, which could add future interest pressure. These dynamics help explain why debt ratios and borrowing costs matter together.