FEUL - Is The Eurozone At Risk From Another Sovereign Debt Crisis?

• Positive changes since the Global Financial Crisis include fewer excesses and imbalances, the ECB's asset purchase programs, and the creation of the ESM and RRF.
• However, following the COVID-19 shock, six eurozone member states will have public debt to GDP ratios well in excess of 100% and achieving sustained reductions will be difficult.
• Given low nominal GDP growth rates, lasting improvements in primary budget balances will be required even if interest rates remain relatively low.
• This will not be easy, given political constraints. Persistent, elevated debt ratios imply a high risk of more turbulent market conditions once the ECB starts to lessen its support.

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