2023: A dangerous year for public finances in the euro zone

In 2023, euro-zone countries are likely to face: Much slower growth, close to potential growth, after the catch-up in 2021 and 2022; A sharp reduction in securities purchases by the ECB, which will one day have to stabilise the size of its balance sheet; The return of European fiscal rules, even if they are more flexible than the previous rules. All this implies the need for a significant reduction in the euro-zone countries’ structural fiscal deficits by 2023, failing which yield spreads between the “virtuous” countries and the others could widen again.