IMF Warns EU Public Debt Could Reach 130% of GDP by 2040

The International Monetary Fund has warned European Union finance ministers that the bloc faces steep rises in defense, energy and pension spending over the next 15 years, with average public debt in EU countries potentially climbing to 130% of gross domestic product by 2040 if current policies remain unchanged. That would amount to roughly twice today’s level. In a research report, the IMF urged the EU to unify energy markets, facilitate cross-border investment flows and harmonize differing laws across member states. It said deeper integration would help the bloc manage the fiscal pressures ahead. The fund also called for pension system reforms and a higher retirement age, saying both steps would be necessary to contain long-term obligations. It argued that without such measures, aging-related costs will add further strain to public finances. The IMF further proposed that innovation, energy and defense be treated as common European public goods financed through a joint borrowing mechanism. It presented the idea as part of a broader effort to strengthen the EU’s economic and strategic resilience.