Who will pay the debts we are accumulating today? The question is usually framed in terms of governments and financial markets, but the answer directly affects households, businesses and, above all, generations that have no say in today's budgetary decisions. Debt makes it possible to bring resources forward and finance worthwhile projects, but it can also become a way of enjoying goods and services today while passing the bill on to those who come after us.

The scale of the historical shift is extraordinary. According to the International Monetary Fund's (IMF) Global Debt Monitor 2025, global non-financial sector debt, both public and private, rose from an average of 96.9% of GDP during the 1950s to 235.5% in 2024. In the countries that now make up the euro area, the ratio increased from 54.2% to 247.1%. This is not simply a matter of governments owing more: household and corporate balance sheets also shape economies' resilience to crises, inflation and high interest rates.

Table 1 compares the four largest euro-area economies (Germany, France, Italy and Spain) with the United States, China and the United Kingdom. Household and corporate debt figures refer to 2024, the latest year available in the IMF's Global Debt Database, reflecting the publication lag for private debt statistics. Figures for 2026 are Capital IQ estimates for the current year. The three debt components shown in the table are therefore useful for comparing vulnerabilities, but should not be added together as though they provided a consistent measure of total indebtedness at a single point in time.

Table 1. Public and Private Debt, Interest Payments, Government Revenue and Fiscal Deficits

Source: Author's calculations based on Capital IQ (2026 estimates) and the IMF Global Debt Database (household and corporate debt, 2024). A negative fiscal balance indicates a fiscal deficit.

Public debt does not disappear: someone ultimately finances it

An economy is not divided into three watertight compartments: the government, households and businesses. Households take on mortgages and loans; companies finance investment and working capital; and governments issue debt securities, with payments funded primarily by revenue generated through economic activity. Public debt need not be repaid in full and immediately: it can be refinanced for decades. But it requires interest payments, the rollover of maturing obligations and the continued confidence of creditors. Ultimately, its economic cost falls on individuals and businesses through various channels: current or future taxes, reduced room for public spending, inflation if monetary financing were pursued on an unsustainable basis, or the crowding out of private investment.

For this reason, before widening the fiscal deficit, a government should consider not only its public debt-to-GDP ratio but also the saving and borrowing capacity of its citizens and business sector. Household and corporate debt represent real constraints: a country with highly leveraged companies and financially stretched households has less room to absorb tax increases or macroeconomic shocks. Sound fiscal policy must consider the balance sheet of the entire economy, not just that of the Treasury.

France, Italy and the United States: three warning signs

France exhibits a particularly troubling combination: public debt estimated at 119.35% of GDP in 2026 and non-financial corporate debt of 154.94% of GDP in 2024, the highest among the countries analysed. Household debt of 60.51% adds another source of exposure. France's problem therefore extends beyond the volume of sovereign debt issuance to the financing of its corporate sector and the resilience of its tax base in a high-interest-rate environment. Moreover, France last recorded a fiscal surplus in 1974: it has gone more than half a century without ending a fiscal year in positive territory.

Italy has the highest public debt-to-GDP ratio in the sample, at 137.30%, although its corporate (59.21%) and household (36.11%) debt ratios are considerably lower than France's. According to the fiscal series available since 1970, there is no recorded year with an overall budget surplus. This does not mean that Italy has never posted a primary surplus, which excludes interest payments: the two concepts are distinct. It means that, once interest expenditure is included, the series examined shows no year with an overall fiscal surplus. Persistent deficits leave less room to respond to a new crisis.

In the United States, public debt is projected to reach 133.98% of GDP, alongside household debt of 69.35% and corporate debt of 73.77%. The fiscal deficit estimated for 2026 is 5.99% of GDP. Although the dollar and the depth of the US government bond market confer major financial advantages, they do not override fiscal arithmetic: a government that repeatedly runs large deficits faces rising costs when it refinances debt at higher interest rates.

The other economies are not free from risk either

China stands out for non-financial corporate debt amounting to 144.19% of GDP and household debt of 61.40%, despite a comparatively lower public debt ratio of 71.20% in the table for 2026. In this comparison, its main relative vulnerability lies in the private sector, especially corporate balance sheets. The United Kingdom has the highest household debt ratio in the sample, at 76.18% of GDP, together with estimated public debt of 95.42%. In both cases, coordination between fiscal policy, private-sector balance sheets and financial stability is essential.

Spain has an estimated public debt ratio of 98.11% of GDP, household debt of 43.70% and corporate debt of 80.28%, following the private-sector deleveraging that took place after the financial crisis and the subsequent European sovereign debt crisis. Its private-sector debt is lower than France's, but public debt close to 100% of GDP constrains fiscal space. Germany offers the most favourable contrast within the sample, with public debt of 65.10% of GDP and the lowest average deficit over the period studied. Nevertheless, its 2026 forecast also points to a negative fiscal balance of 3.78% of GDP. None of these figures, taken in isolation, necessarily indicates a highly dangerous situation; what matters is how they interact with economic growth, financing costs, debt maturities and fiscal credibility.

A decade of deficits and a long absence of surpluses

Deficits are not a temporary phenomenon. Between 2016 and 2025, every country in Table 1 except Germany recorded an average annual fiscal deficit of at least 4.30% of GDP: the United States, 7.11%; the United Kingdom, 4.99%; Italy, 4.85%; France, 4.83%; China, 4.49%; and Spain, exactly 4.30%. Germany was the exception, with an average deficit of 1.17%. The period includes extraordinary events, particularly the pandemic, but in many advanced economies fiscal deficits have ceased to be exceptional episodes and have become recurring imbalances, even outside periods of crisis.

The dates of the last overall fiscal surpluses reinforce this diagnosis: Germany achieved one in 2019; China and Spain in 2007; the United Kingdom in 2001; and the United States in 2000. France has not achieved one since 1974, while Italy has recorded none since 1970 in the time series examined. Nor is it essential to run a surplus every year: a temporary deficit may be justified to stabilise the economy or finance investments with lasting social returns. The problem arises when the imbalance becomes a permanent practice, without a credible strategy to stabilise the debt burden.

Interest payments: the bill we are already paying

Perhaps the most telling figure in Table 1 is not the amount of debt outstanding, but the cost of servicing it. In 2026, estimated interest payments account for 13.43% of projected government revenue in the United States: roughly 13.4 out of every 100 units of revenue would go towards interest before funding any other public policies. This amounts to €1,121.73 billion in interest payments against projected revenue of €8,351.66 billion.

The burden is also significant in the United Kingdom (8.90%), Italy (8.28%), China (6.48%) and Spain (6.09%); the figures are 4.94% for France and 2.61% for Germany. These ratios do not indicate what proportion of debt matures each year, but rather interest expenditure as a share of projected government revenue. Other things being equal, every euro committed to servicing past obligations reduces the room available for education, healthcare, housing, infrastructure, research or new responses to emergencies. Although interest is paid to creditors and some of that money flows back into the economy, the resulting rigidity in public budgets is considerable.

Inflation and interest rates could make matters worse

Assuming that debt-servicing costs will soon fall is a risky bet. European Central Bank projections published in September 2026 put euro-area inflation at around 2% in 2028 (2.1% in the baseline scenario), while the US Federal Reserve's September 2026 projections place US inflation close to its target, although still slightly above it in 2028. It would be wrong to claim that an exact return to 2% is guaranteed. If disinflation takes longer than expected, central banks may keep interest rates elevated for longer or tighten monetary policy again if inflationary pressures intensify.

The effect on public finances depends on the maturity profile of outstanding debt: not all debt is refinanced immediately, but the interest rates demanded on new issuance gradually feed through to the average borrowing cost. When the effective interest rate on public debt persistently exceeds the nominal GDP growth rate, stabilising the debt-to-GDP ratio requires a greater fiscal effort, generally in the form of a primary surplus - that is, government revenue exceeding expenditure excluding interest payments. The larger the stock of debt, the greater the effort needed to prevent it from continuing to rise relative to GDP. The same risk affects households with variable-rate mortgages and businesses refinancing loans, so an interest-rate shock can hit public and private balance sheets simultaneously.

Who really bears the fiscal burden?

Ultimately, the capacity to sustain public debt rests on society's resources. The OECD's Revenue Statistics 2025 shows that in 2023 personal income taxes accounted, on average, for approximately twice as much tax revenue as taxes on corporate profits. In Spain, the difference was slightly more than threefold. This comparison highlights the importance of individuals as taxpayers and helps explain why an unsustainable fiscal trajectory poses a particular threat to households' disposable income.

It would, however, be too simplistic to argue that the entire burden is shared in the same proportions: there are also value-added taxes, excise duties, social security contributions and other sources of government revenue. Moreover, the ultimate economic incidence of corporate taxation may fall on shareholders, workers or consumers. Nor is debt automatically distributed equally across generations: future generations will inherit public liabilities, but they may also inherit public assets, infrastructure and services if today's decisions are sound. Fiscal sustainability and intergenerational justice depend not only on the level of debt but also on how borrowed resources are used, economic growth and financing costs. The decisive question, therefore, is what economic and social return the debt delivers and who will bear the cost of financing it.

Justice between generations

Borrowing can enable a government to build hospitals, transport networks or schools that will also benefit people not yet born. In such cases, spreading the cost of an investment over time can be fair. The difficulty begins when debt is repeatedly used to sustain current consumption without creating the future capacity to repay it. At that point, there is a risk of turning one generation's well-being into the next generation's obligation.

This distinction is consistent with the Christian values of prudence, temperance and intergenerational justice. Prudence requires a realistic assessment of repayment capacity and risk; temperance encourages restraint in the desire to consume beyond available resources; and justice calls for recognition of the interests of those who have no voice in today's decisions. This is not about denying the social role of public budgets or demanding indiscriminate austerity, which may harm the most vulnerable. Rather, it is about preventing fiscal policy from normalising the transfer of disproportionate burdens to people who had no opportunity to decide whether to incur them.

Pope Francis expressed this responsibility with particular clarity in Laudato si' (2015), no. 159: “The notion of the common good also extends to future generations. The global economic crises have made painfully obvious the detrimental effects of disregarding our common destiny, which cannot exclude those who come after us. We can no longer speak of sustainable development apart from intergenerational solidarity.” Although the encyclical focuses primarily on caring for our common home, the Earth, the principle can also be applied to the sustainability of public finances. Today's well-being cannot be built by ignoring tomorrow's obligations and rights.

Pope Francis was even more explicit when addressing the leaders and employees of Italy's National Social Security Institute on 3 April 2023: “Worrying signs in this regard are the ecological crisis and public debt, a burden that falls on the shoulders of our children and grandchildren. To think that in some countries, your grandchildren – you are not married yet, but your grandchildren will be born with a public debt – terrible!” He went on to explain that it is unjust to pass irreversible and excessive burdens on to young people. His reflection pointed to an all-too-contemporary temptation: that those who make decisions and enjoy certain benefits may not be the ones who fully bear their consequences.

Pope Leo XIV reaffirmed this principle in Magnifica Humanitas. In paragraph 83, he states: “Justice demands the recognition of the rights of society and the rights of peoples, and includes a responsibility toward future generations.” The statement is particularly significant because it places intergenerational responsibility at the heart of social justice. Justice cannot be measured solely by what we distribute today; it must also consider what we preserve and pass on to future generations.

This leads to the central reflection. A generation has the right to finance projects that enhance collective prosperity, but it does not have an unlimited right to consume today while passing on to its children and grandchildren the obligation to pay a bill for which they receive nothing in return. The relevant question is not simply how much we owe, but why we borrow, who benefits, who will pay the costs, and what opportunities can be created afterwards given the level of debt already accumulated. A society genuinely committed to solidarity cannot pass on more debt without a corresponding benefit: it should aspire to bequeath greater capabilities, more freedom, financially sound institutions and better opportunities.