The International Monetary Fund has warned European Union countries of the risk of a rapid surge in public debt if governments do not change their approaches to fiscal policy. This is stated in an IMF document presented to EU finance ministers at a meeting in Nicosia, Politico reports, according to UNN.
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The Fund stated that without additional measures, the public debt of the average European country could rise to 130% of GDP by 2040, which is almost double the current level. The IMF emphasized that EU countries are increasingly facing costs for defense, energy, and pension provision.
The "muddling through" approach that many countries have applied so far is reaching its limits
The Fund called for structural reforms, fiscal consolidation, and the expansion of joint borrowing to finance key areas, particularly defense and energy.
European Commissioner for Economy Valdis Dombrovskis also stated that the EU faces a "very specific and urgent political challenge." According to him, the current fiscal space in many countries is already limited, and the problem is exacerbated by an aging population.