ESM Report Shows Greece Outperforms Euro Area Countries in Debt Resilience

The European Stability Mechanism (ESM) has released a report highlighting Greece's improved debt resilience, showing that its public debt could decline even under unfavorable international conditions. The report, titled Euro Area Stability Watch, assesses macroeconomic and financial risks for the euro area and their impact on member-states' fiscal positions and sovereign bond markets.

The assessment is based on an adverse scenario prepared by the ESM, which involves a new escalation of tensions in the Middle East, higher energy prices, and a significant decline in US stock and bond prices. This would result in losses for European investors, pushing the euro area economy into recession with a 0.4% GDP decline in 2027 and inflation rising to around 5%.

Under this adverse scenario, Greece's public debt is expected to decline by 2035, unlike other euro area countries where it would increase. The report notes that the increase in euro area public debt under this scenario would be approximately 20 percentage points higher than the baseline scenario aligned with the European Commission's latest economic forecasts.