With the approval of the 500 billion Euro investment package in March 2025 by the Bundestag, the topic of national debt has gained attention in Germany once again. The current debt stands at 2.5 trillion Euros, and an additional 500 billion Euros will be added – money that must somehow be earned back. Typically, financing comes from tax revenues, which, in turn, come from what was once known as the Gross Social Product and is now called Gross National Income (GNI) since 1999. This refers to the revenue from all goods and services produced within a country. Whether a country’s debt level is healthy or critical can be determined by looking at the Gross Domestic Product (GDP). Economic growth, as another indicator and forecasting tool, shows whether the debt can be repaid in the future.

COVID-19 Caused a Surge in Debt 

The COVID-19 pandemic pushed many businesses into severe distress. To avoid mass bankruptcies, countries worldwide were required to provide active support. These unforeseen expenses caused national debts to skyrocket, and the debt-to-GNI ratio increased.

Greece, the hardest hit by the financial crisis in 2009 in Europe, has always been somewhat “open” about its national debt. As a result of COVID-19, this ratio exploded in comparison to other European countries. However, credit should be given to Greece, as they managed to reduce the ratio in early 2025 to a level lower than in 2015.

The same happened in Italy, but with a significant difference compared to, for example, France. Italy was able to reduce its debt-to-GNI ratio, while it remained stable in France. The same also applies to the EU’s debt success story, Estonia. Despite their consistent fiscal policy in previous years, the Baltic states have not managed to bring the debt-to-GDP ratio back to pre-COVID levels.

Germany reflects the overall European situation, with data from earlier years likely being somewhat better compared to future trends. The development is almost identical across the board.

Economic Growth as a Key Factor 

The development of Gross National Income, as the sum of all economic transactions, obviously depends on its growth, or economic growth. It’s difficult to generate rising revenue when growth is declining. Given this, it’s worth taking a look at the European data.

Let’s start with Germany. In 2022, growth was 1.4%, but it fell to -0.3% in 2023, -0.2% in 2024, and is projected to be 0% in 2025. In 2026, a rebound of 1.1% is expected (Source: Statista).

Example of Italy 

Let’s take a look at Italy, which has long been associated with fiscal recklessness and lack of discipline. In 2020, Italy’s economic growth was at a remarkable -8.8%, but it bounced back to 8.93% the following year, dropped to 4.66% in 2022, and has since stabilized at just above 0.7%, including projections for the coming years. In terms of economic growth, Italy is ahead of Germany (Source: Statista).

Interestingly, Italy pulled itself out of the swamp with a solidly increased national debt, like Münchhausen pulling himself up by his own hair. The “Superbonus 110” program (2020-2022) subsidized energy-efficient modernization measures on buildings with up to 110%. This caused an incredible boom in the construction industry, which was completely occupied. The costs: 220 billion Euros. The result: The Superbonus 110 program contributed two-thirds to economic growth in 2021 and 2022, creating 170,000 jobs, and households saved a total of nine billion Euros in energy costs every two years (Source: diebaz.com).

The leader in economic growth in 2023 was Malta, with 6.7%. The laggard was Ireland, with -5.5%, while the EU average was 0.4% (Source: Destatis).