The International Monetary Fund has criticized the European economy. The theme is growth that is practically at a standstill, amid tariffs and uncertainties that weigh on the markets. In this way, public debt risks exploding in the next 15 years. The Fund has warned Europe that it is entering a phase of mediocre growth, with structural risks that could push average debt to 155% of GDP if “courageous” reforms are not adopted.
The European Union’s slow decision-making process, national constraints and the lack of a common plan for growth end up in the spotlight. Among European countries, however, one exception stands out: Italy is defined by the IMF as being in the running for an “impressive outperformance” in terms of budget results. The Italian deficit, estimated at 3% of GDP, is better than expected and deserves a promotion that contrasts with the worried tones reserved for the rest of Europe.
IMF, critical of Europe
The IMF criticizes, or rather scolds Europe. The reason is that it is at a decisive moment, where growth remains too low and existing budget plans are insufficient to manage the huge spending push. This is the analysis which, continuing, without courageous reforms will lead to an average European debt that risks rising to 130% of GDP by 2040 or even 155% on a weighted basis.
The Fund therefore invites the Union to review its institutional mechanisms, even going beyond unanimity and introducing majority voting to accelerate the necessary structural reforms. Among the many suggestions, one was commented as “radical”, namely the creation of a “single market tsar”, capable of coordinating the economic policies of the 27 member countries.
Growth forecasts for this remain modest: +1.2% in 2025 and +1.1% in 2026, to curb the risks linked to duties and geopolitical instability.
Among the other problems expressed by the Fund, the internal barriers to trade which equate to costs of 44% for goods and 110% for services. According to European director Alfred Kammer, these put debt sustainability at risk.
The opinion is that Europe must aim for a more robust common budget, regular EU debt issuance and a truly shared investment plan to reverse the trend.
Italy promoted: better than expected accounts
While warning Europe, the Fund recognizes Italy as one fiscal outperformance. Helge Berger, deputy director of the European Department, commented on the data by declaring: “The results on public finances are impressive”. In fact, for 2025 the deficit stands at around 3% of GDP, better than the Fund’s forecast of 3.3%.
Alfred Kammer also defined the management of the Italian deficit as “fantastic”, underlining that the country is doing better than expected. The updated estimates in fact indicate a debt/GDP ratio of 138% in 2026, with a possible drop to 137% in 2030. These are numbers that consolidate Italy’s financial credibility on the markets, despite a rather uncertain European context.
These statements must be considered in the context of the Bank of Italy report, which describes how since November 2024 it is now the seventh consecutive time that the 3,000 billion quota has been exceeded. In August, Italian public debt increased by 25.4 billion compared to the previous month.
The reasons come from Palazzo Koch: increase in the Treasury’s liquid availability, overall effect of discounts and premiums on the issue and redemption of government bonds, the revaluation of inflation-indexed bonds and the change in exchange rates.
