The complicated question of the trajectory of public finances in the euro zone

Euro-zone countries are faced with: The need to reduce the headline fiscal deficit on average by 2 percentage points of GDP over the next five years; A significant rise in long-term interest rates and in public debt interest payments, leading to the need to considerably reduce (by around 4 percentage points of GDP) the primary fiscal deficit (excluding interest on the debt) over the next five years; A significant need for increased public spending in many areas (healthcare, education, defence, industry, energy transition, etc. ); A slowdown, rather than an acceleration, in potential growth. There are then only three solutions: Refrain from reducing the fiscal deficit and stabilising the public debt ratio; Refrain from increasing even necessary public spending; Increase the tax burden sharply.