ZEW Economist Heinemann on Growing Sovereign Debt in the Eurozone


"The Situation Becomes Risky for Countries Where High Debt Is Accompanied by a Persistent Reform Backlog"

The right way to deal with the high sovereign debt levels of many eurozone countries in the post-Covid era is the focus of a discussion today at an English-language seminar organized by ZEW Mannheim and EconPol Europe in cooperation with the Brigitte Strube Foundation. The panelists are Dr. Cinzia Alcidi, Director of Research, Head of the Economic Policy Unit at the Centre for European Policy Studies (CEPS) in Brussels; Prof. Volker Wieland, Ph.D., Professor of Monetary Economics at Goethe University Frankfurt and member of the German Council of Economic Experts; and Prof. Dr. Friedrich Heinemann, Head of Research and expert on Public Finance at ZEW. Commenting on the possible handling of government debt in the eurozone, Heinemann says:

"The high debt levels after the pandemic are well manageable for euro countries with a strong growth perspective. However, the situation is risky for countries where high debt levels are accompanied by a persistent reform backlog. The ECB will not be able to keep the risk premiums of problem states artificially low in the long term either, because this would constitute a violation of the ban on monetary state financing. The Corona reconstruction plan "Next Generation EU" must be a success and finally put countries like Italy on a growth path. Only then can the Eurozone escape the next debt crisis."