Euro zone government debt will surge this year on the coronavirus pandemic, but while another debt crisis is unlikely, large differences in indebtedness as countries emerge from the downturn could seriously test their unity. The International Monetary Fund (IMF) expects debt in the 19 countries sharing the euro to jump by more than 13% of GDP to 97% this year as Europe-wide lockdowns cause an unprecedented 7.5% euro zone recession. Interest on bonds of already highly indebted Italy, Spain, Greece or Portugal is up by only 40-50 bps – kept in check by massive European Central Bank bond buying.
