Italy, France and Belgium have the most concerning debt-sustainability outlooks in the EU, according to the latest study published by the National Bank of Belgium.
The analysis published today found that Italy, France and Belgium are the most fragile economies in Europe when it comes to government debt.
They already carry some of the heaviest debt loads in the European Union, and their problems are made worse by rapid population ageing and rising pension costs.
Koen De Leus, chief economist at BNP Paribas Fortis, agrees with that assessment. “That is indeed the case,” he says, “their debt ratios are among the highest in Europe”. This means that these governments already owe far more than their yearly economic output is worth.
The risk is that when a country spends more on paying off old loans, there is less room left for schools, hospitals, climate and other investment.
De Leus, who wrote a book where he put the ageing and pension issues as central in today’s economy, notes that Europe is more exposed to ageing than other regions because “a very large share of pensions come from the public system”.
“That makes it extremely difficult to reform public pensions,” he says, any attempt to do so tends to face immediate resistance from citizens.
The number of retired people is rising much faster than the number of workers in most European countries, but in Italy, for instance, pensions already cost about 16 per cent of the country’s entire economic output. This is the highest share in Europe.
The National Bank of Belgium’s study shows that ageing and debt feed each other. The more societies age, the more they spend; the more they spend, the heavier their debt becomes.
Mounting pressures from climate and defence spending that aggravate debt sustainability risks are also discussed in the report.
The study states that Belgium’s general government debt ratio was “at around 104 per cent of GDP at the end of 2024. Belgium already spends about 11.2 per cent of its GDP on state pensions, covering 2.6 million people – around 22 per cent of the population.
By 2050, one in four Belgians will be over 65 years old, pushing pension spending towards 13 per cent of GDP, the Brussels Times reported earlier this year.
The hardest part, De Leus says, is healthcare. “New technology can reduce healthcare costs through prevention and remote monitoring but new medicines can make expenses spiral out of control.”
Across Europe, new treatments such as gene therapies and targeted cancer drugs could dramatically improve lives, yet they also might take billions out of public health budgets.
But birth rates and demographic structure cannot be changed quickly. Instead, De Leus says governments can act on other levers, most importantly by raising productivity so that the the total income grows.
For Belgium in particular, he explains “getting more people into work” is key.
In Belgium, unemployment has risen from 5.5 per cent to 6.5 per cent over the past year, and recent reforms have targeted long-term unemployed jobseekers. This month, the third wave of official letters will inform 47,691 people that their unemployment benefits will end by April 2026.
When it comes to solutions, each country has a different best “medicine”, De Leus says.
Cutting pensions is a limited option if benefits are already modest and raising taxes is difficult because Belgium, France, and Italy already have very high tax levels.
In Belgium, the planned “De Wever agreement”, named after the new right-wing prime minister Bart De Wever, and which includes pension reforms and incentives to work longer, is supposed to “halve the future growth of pension costs”.
Its implementation, though, is delayed because the federal budget has not yet been adopted, after several deadlines to find an agreement on it have been missed.
De Wever has received a final deadline of Christmas to secure a deal, or he will have to resign as a prime minister.
Because no federal budget has been adopted, several planned reforms including the pension overhaul and the capital-gains tax, cannot be voted on or implemented.
Only the unemployment reform has been enacted so far, while the other measures will likely be delayed into 2026, affecting the expected budget by up to €1 billion to €1.7 billion, Belgian media outlet RTBF reported on November 8.
The US, the study shows, has an higher public debt than Belgium. American lawmakers are also struggling to find an agreement on how public funds should be spent and how far the debt can be expanded.
Disagreements over raising the debt ceiling have recently led to the “longest ever government shutdown” and the first in more than six years.
France faces similar pressures. The Cour des Comptes, France’s supreme audit institution, recently projected a €30 billion annual pension deficit by 2045, with overall pension spending climbing from around €330 billion to €350 billion even after reforms.
That means the country will have to keep borrowing if it wants to keep the legal pension age as it is.
For Belgium and France, potential GDP growth is projected to be slightly above 1 per cent over the period to 2034.
By contrast, according to the study, the US is expected to maintain its growth advantage, with real GDP increasing by 2.8 per cent in 2024 and softening to potentially 1.8 per cent by 2034.
