Is public debt sustainability called into question in the euro zone?

P ublic debt sustainability may indeed be called into question in the euro zone, given: High fiscal deficits; The prospect of weak growth; Rising interest rates. Y et financial markets do not show great concern. There is no sign of high probability of a debt crisis. Why are markets relatively calm (which can be seen in the low level s of risk premia and term premia on euro-zone government bonds)? Because financial markets expect the ECB to ensure governments ’ solvency even if there is high inflation; Because financial markets expect that relatively stringent fiscal rules will be restored in the euro zone; Because financial markets believe that growth in the euro zone will recover thanks to the investment policies implemented. None of this is certain, and there is a risk that public debt sustainability will be lost in the euro zone if the ECB fights inflation, if stringent fiscal rules are not put in place or if euro-zone potential growth does not pick up.