Europe is paying for its past excesses: European interest payments as % of GDP.

With interest rates rising in Europe and heavy debt-to-GDP ratios, I decided to look at how much interest each European country must pay going forward as a percentage of its economic output. I threw in the United States for fun. (Table sorted by interest payment %age of GDP.)


2-year interest rate


Interest payment %age of GDP





























Great Britain








United States




Now, these debt figures account only for federal government spending. Many countries, most notably the United States, also has state, provincial, and local governments with their own debts. Additionally, many of the debt-to-GDP estimates are from 2010. Thus, most of the above countries have debt-to-GDP ratios and interest expenses even worse than calculated above.

Clearly, we can see why Greece is in trouble. If it were to refinance its debt at market rates (it has been refinancing through Euro-zone subsidized loans), its interest payments would exceed its GDP by a half.

Italy is also paying for its problems. So far, Italy has received no help from any bailout fund and, as of now, will have to refinance its debt at market rates. As such, it will cost Italy 8.5% of its GDP to do so. If it had a more reasonable debt level and interest rates, say those of France, Italy would have an additional 7.4% of GDP to spend or save.

Most surprising is how everybody is ignoring Portugal. Portugal has already received bailout funds, but that won’t last forever. If Portugal were to return to normal by accessing the market, interest payments would eat up 15.3% of its GDP. That’s a lot to pay for past mistakes.

Belgium is another sleeper. It’s problems are just as bad as Spain’s, yet nobody is talking about them. Furthermore, Belgium has not been able to form a ruling coalition since elections were last held on June 13, 2010, breaking all records. Furthermore, the New Flemish Alliance party is Belgium’s largest political party with 17% of the vote. This party favors the “peaceful and gradual secession of Flanders from Belgium.” Lots of problems there, but nobody seems to be talking about it.

So far, Europe has paid for the mistakes of Greece, Portugal, and Ireland. However, Italy’s debt is 2.7 times the combined debt of those three nations that are already receiving bailout funds. That makes Italy both too big to fail and too big to bail out.

Europe is facing problems on multiple fronts: Greece, Italy, Portugal, Ireland, Belgium, and Spain, to name a few. So far, Europe has successfully staved off depression by bailing out the smaller, weaker countries. But as the problem spreads to more countries, and bigger ones at that, Europe is running out of room and options.

– Michael E. Newton is the author of the highly acclaimed The Path to Tyranny: A History of Free Society’s Descent into Tyranny. His newest book, Angry Mobs and Founding Fathers: The Fight for Control of the American Revolution, was released by Eleftheria Publishing in July.

6 responses to “Europe is paying for its past excesses: European interest payments as % of GDP.


  2. Michael,

    Well done. Do you think in Europe running out of options portends a deep reession or depression and the possible demise of the Euro zone?

    • I won’t say that Europe is done. You look at the stats above and not every country is doomed. Germany basically has a balanced budget and manageable debt. If they immunize themselves from the problem countries, they could survive, though with some pain. But I don’t see how Greece can survive as is unless Germany and France risk their own nations all to save them.

      Politically, this could go either way. Europe can break up, start bickering over money, and start trade wars with each other. Or they can bail each other out, tie themselves closer together, and fall under a continent-wide autocratic rule. Either way is bad, but the latter is much worse for more people than the latter. But so far, that is the path Europe has chosen to take.

      Great Britain is looking awfully smart right now. They are not a part of the Euro and have the lowest debt-to-GDP ratio on that list. They are also less tied to Greece, Italy, Spain, Portugal, etc. than Germany or France. Of course, the United States is even more independent from Europe and has closer ties to Asia, which has been performing much better than Europe, though that might end soon too.

      The world is in trouble and things look to get worse before they get better. European style social democracy is reaching its limits, but we don’t know what will replace it. As Thomas Paine said, “These are the times that try men’s souls.”

  3. Pingback: The end of the euro is nigh | Machholz's Blog

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