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While in the first part we attempted to highlight the historical and economic construction of the European Union through an analysis of the Western states (the founders of the European project and the main promoters of European fiscal discipline), in the second part we set out to analyze the situation from the perspective of public debt and the rest of the states on the old continent. A special case is Eastern Europe, a region that has been marked by the transition from planned economies to market economies, and the countries of the former Soviet bloc that have gradually integrated into the structures of the Union, bringing with them significant economic potential, but also systemic vulnerabilities.
This second part aims to be an analysis of how the new member states have related to the Western economic model, how they have managed public debt in the context of convergence processes, and what effects austerity, privatization, and reform policies have had on Eastern European governments. We will also attempt to explain the Northern European economic model, mirroring the Southern European and island models, as well as the impact of EU enlargement on European budgetary balance, the emergence of new regional economic centers, correlated with the transformations generated by recent events that are putting the EU to the test (the energy crisis, the pandemic, and the conflict in Ukraine). The question we want answered is whether and how the EU can maintain its economic and political cohesion in an increasingly diverse space where public debt, levels of development, and national priorities continue to be deeply unequal.
Northern Europe: prosperity through innovation and an efficient welfare state
If we think of Western Europe as the economic heart of the European Union, we can say that Northern Europe (made up of Iceland, Norway, Sweden, Finland, and Denmark) is its clear-headed mind. Throughout history, the countries of Northern Europe have succeeded where the rest of the continent has tried, but failed, to combine the efficiency of the free market with a generous and functional welfare state. In most economic reports, the Nordic economic model is often characterized as “the most successful synthesis of capitalism and solidarity.” In these countries, governments support innovation, public debt is kept under control, and social trust (i.e., the level of mutual respect between citizens and institutions) reaches record levels.
Sweden is by far the European leader in the green and digital economy, with one of the lowest public debts in the EU (approximately 31.5% of GDP). The Swedish model is built on a combination of fiscal discipline, technological innovation, and social investment. The areas that add value to the Swedish economy are technology and digitization, education, and green industry. Companies such as Ericsson, Klarna, and Spotify have made Sweden a global hub of innovation. In terms of green industry, Sweden has invested heavily in wind energy, recycling, and sustainable transport. The free, critical thinking-oriented education program produces a skilled workforce. From the perspective of areas where Sweden is deficient, we can list traditional heavy industry and agriculture, which have lost ground to automation and outsourcing. For many years, Sweden was renowned for its metallurgical industry and paper production, but with the implementation of green, non-polluting projects, these industries have declined dramatically. Swedish agriculture remains dependent on imports and subsidies. In terms of social policies, Sweden allocates approximately 30% of its GDP to social protection. Social benefits include support for education and housing, generous parental leave, and universal public health care. As a result of these policies, Sweden has one of the lowest poverty rates in the world and strong social cohesion.
When we talk about Denmark, we can say that it is a fascinating case. The Danish state maintains a small administration but provides extensive public services. Danish public debt is 35.5% of GDP, with Denmark managing to transform the welfare state into an efficient mechanism. Renewable energy (Vestas, the wind power giant), the maritime industry (Maersk, the world leader in container transport), IT, and biotechnology (sectors experiencing exponential growth) are the areas in which the Danish economy excels. On the downside, we can list the construction industry (affected by high labor costs) and traditional agriculture, which is losing ground in global competitiveness. On the social front, Denmark offers universal assistance in education and unemployment, health, but makes this assistance conditional on the active participation of citizens in the labor market (“flexicurity”). The result is an employment rate of over 75% and stable debt, supported by a solid tax base.
With public debt at 73.9% of GDP, Finland is more economically exposed than its northern neighbors but remains an example of responsible governance. For many decades, the USSR was its major trading partner, but after the collapse of the USSR, Finland reinvented itself through education and technology. Forestry and natural resources (sustainable exploitation and export of ecological know-how), technology (Nokia’s legacy has created a solid start-up infrastructure), and education (focused on critical thinking, the Finnish education system is considered the best in the world) are Finland’s economic and social strengths. After the decline of Nokia, the traditional electronics industry has declined considerably, and the banking sector, consolidated through mergers, is not Finland’s strong point. With an emphasis on equal opportunities and innovation, the Finnish state invests over 28% of GDP in social services, while economic crises, whether regional or global, have always been treated as opportunities for reform, not austerity.
The Kingdom of Norway is part of the European Economic Area, although it is not a member of the EU. An example of natural resource management, with a public debt of 39% of GDP, Norway has the largest sovereign wealth fund in the world (over USD 1.5 trillion). Financial and digital services, hydroelectric power, and marine technologies, along with significant oil and natural gas reserves (managed sustainably), are the key drivers of the Norwegian economy. The nearly 35% of the budget that Norway allocates to finance social protection comes largely from sovereign wealth fund revenues, not debt, resulting in absolute fiscal stability and an economy ready for the post-oil transition.
Iceland has made a spectacular comeback after the devastating banking crisis of 2008 by focusing on green technologies, geothermal energy, and tourism. With public debt at 67% of GDP, the Finnish fiscal model is now one of the most prudent in the world, and the state has learned the hard lesson of oversizing the financial sector.
The Nordic countries show us that prosperity can be achieved through education, transparency, and fairness. By keeping public debt low, the population has confidence in institutions, and because corruption is almost non-existent, a healthy economic environment can be created. This healthy economic environment is the model that the European Union is trying to extend through structural reforms, but which remains difficult to apply in the south or east of the EU, where cultural and historical factors are completely different.
Southern Europe, the fragile beauty of indebted economies
If the north symbolizes efficiency, southern Europe symbolizes complexity. Greece, Cyprus, Italy, Spain, and Portugal are countries with strong historical traditions, but with economies marked by structural rigidities, political patronage, and high social pressures. The southern EU was hit hardest by the financial crises of 2008–2013, exposing its dependence on tourism, domestic consumption, and excessive public spending. We can say that the countries in the south of the EU suffer from a fatal combination: bureaucratic structures, low productivity, and high debt. However, their tourism, cultural, and human potential is enormous. The crisis has forced southern leaders to learn fiscal discipline, and reforms in digitization and green energy offer a new chance for modernization.
Italy is the paradox of indebted prosperity, with 137.3% of GDP. Italy is the symbol of the southern paradox, a developed but chronically vulnerable economy. Industry in northern Italy (Lombardy, Emilia-Romagna) is among the most competitive in the world, while the southern part (Mezzogiorno) remains underdeveloped. Tourism and gastronomy, the automotive industry, design, fashion, and luxury goods are the areas that add value to the Italian economy. Bureaucracy and endemic corruption in the administration, along with agriculture, are Italy’s weak points. Italy allocates over 29% of its GDP to social protection, but the inefficiency of the system and tax evasion amplify the debt. Successive political crises and the lack of structural reforms have maintained a state of chronic stagnation.
Spain, with a debt of 100.6% of GDP, can be characterized by two terms: transformation and vulnerability. In the 2000s, it experienced spectacular growth, but the 2008 real estate crisis brought the Spanish economy to its knees. However, fiscal reforms subsequently brought about a recovery based on exports and tourism. With 80 million visitors annually, tourism is one of the areas of added value to the Spanish economy. In addition to tourism, renewable energy (solar and wind) and the automotive and textile industries are boosting the Iberian economy. Analysts argue that Spain’s weaknesses lie in the banking sector, which has been affected by the debt crisis, and the construction sector. Spain faces high unemployment, especially among young people. Twenty-eight percent of the national budget is spent on social assistance, and the Catalan crisis and political fragmentation have deepened internal polarization.
After being on the verge of bankruptcy in 2011, Portugal has become an example of recovery through reform. We could say that the Portuguese have learned discipline from the crisis. Although its public debt is 112% of GDP, the economy is growing steadily, with Lisbon attracting investment in technology, tourism, and renewable energy. Social policies are balanced, with allocations of 26% of GDP, and Portugal’s success is largely due to cooperation with the EU and the efficient management of European funds
With 142.2% of GDP in public debt, Greece is the symbol of the European debt crisis. The country went through the most severe economic crisis in Europe’s recent history between 2009 and 2018, losing a quarter of its GDP. Tourism, which accounts for 25% of GDP, and maritime transport (Greece has one of the largest commercial fleets in the world) are keeping the country afloat. The local Greek industry has been decimated by austerity, and the public sector is considered corrupt and inefficient. See the European Public Prosecutor’s Office investigation into the misappropriation of European funds intended for the agricultural sector, involving senior Greek officials. Greece has achieved slow stabilization, which required three financial rescue programs. Unfortunately, the social cost has been enormous, with the country experiencing alarming unemployment rates, a decline in the birth rate, and massive migration of citizens to the West.
Cyprus, a microstate dependent on financial services and tourism, has a debt of 85% of GDP. The 2013 financial crisis, triggered by exposure to Greek debt, led to rapid reforms. Currently, the Cypriot economy is growing moderately, supported by foreign investment and IT.
Central and Eastern Europe: between convergence and fragility
Poland, the Czech Republic, Slovakia, Hungary, Romania, and Bulgaria represent the story of rapid transformation over the last three decades. After the fall of communism in 1989, these countries transitioned from planned economies to market economies, from authoritarian regimes to functional democracies, and from isolation to European integration. Low labor costs, access to European funds, and accelerated industrial development make these countries the engine of EU growth. But behind this success lie fragilities such as underdeveloped social infrastructure, dependence on foreign capital, and a growth model based on consumption rather than innovation.
Poland is the EU’s eastern tiger. With public debt at 49.2% of GDP, Poland is the largest and most stable country in Eastern Europe. Its economy has grown steadily, without a major recession, becoming a pillar of the region. Modernized agriculture, the automotive and electronics industries, IT, and outsourcing are areas in which Poles excel. Due to European climate policies, the mining sector (especially coal mining) is in decline. The state allocates approximately 23% of GDP to social protection, but with an emphasis on family support through child allowances and subsidies. The Polish economic model combines market capitalism with economic nationalism. Politically, Poland has experienced tensions over the rule of law, but nevertheless has a robust economy with an emerging middle class and sustainable debt.
When we say Czech Republic, we say Central European discipline. With public debt at 44% of GDP, it has one of the strongest economies in the region. The standard of living is close to that of Austria and is due to a diversified industry and efficient administration. Urban and medical tourism, electronic and mechanical equipment, and the automotive industry are just three of the economic sectors that make the Czech Republic an economically stable country. With expenditures of approximately 25% of the budget, the government maintains prudent taxation and a balanced social policy, demonstrating that discipline and transparency can transform a post-communist economy into a mature European one.
Slovakia (57% of GDP debt) is integrated into Western production chains and heavily dependent on the automotive industry. Joining the eurozone has imposed rigorous fiscal discipline, which has limited monetary flexibility. With a small economy, but well connected to Germany and the Czech Republic, Slovakia’s major challenge is its excessive dependence on a single sector (automotive) and the exodus of its workforce.
Hungary (public debt of 76% of GDP) has followed a fluctuating economic path. The government has combined foreign investment with political control over the economy. Small entrepreneurs, the media, and education affected by politicization are the downsides of the Hungarian economy. On the other hand, Hungary excels in the automotive, energy, agriculture, pharmaceutical, and IT industries. Although the government invests 27% of its budget in social policies, regional imbalances persist. A structural problem for European convergence is that, although economic growth is real, institutional freedoms are being eroded.
When the communist regime fell in Romania, the country had no external debt. Currently, government debt, reported at the end of the third quarter of 2024, was approximately 53.1% of GDP, and macroeconomic models and expert forecasts estimate that debt could reach close to 59–60% of GDP by the end of this year. Estimates suggest that with a deficit of over 8% in 2025, the 60% threshold may be exceeded. The increase in government debt is mainly driven by a very large budget deficit (reported as ESA 9.3% of GDP in 2024), fueled by increases in pensions and wages in the public sector, as well as increases in current expenditure. Romania faces high interest costs; when analyzing loans among member countries, Romania pays the highest interest rates in the EU. These issues have been repeatedly highlighted by European institutions and rating agencies, which have warned policymakers. The government is currently attempting to implement economic reforms, but the effects are not yet being felt. The issue of the unreformed special pension law may soon lead to the loss of over €200 million from the PNNR. The European Commission has stepped up procedures for Romania because of its excessive deficit. If the debt definitively exceeds 60% of GDP, comparisons with other EU countries will change, and Romania will no longer be a country with “low debt” relative to the EU average.
Persistent poverty but fiscal stability makes Bulgaria (with a public debt of only 26.7% of GDP) a champion of fiscal discipline, which has allowed it to join the euro on January 1, 2026. Low public spending, low wages, and massive migration are actually the flip side of success. Bulgaria has a big problem with infrastructure, healthcare, and education. On the other hand, it excels in IT, outsourcing, and tourism. Bulgaria has the lowest percentage of GDP allocated to social protection in the EU, at 18%, which keeps debt low but accentuates social inequalities.
Central and Eastern Europe is the “laboratory of European convergence.” Eastern countries are growing rapidly, but have not yet consolidated a sustainable internal development model. They remain dependent on foreign investment and EU funds, which makes their economies vulnerable to external shocks.
Ireland, Malta, Lithuania, Latvia, and Estonia, small or geographically isolated states with a strategic role in the European Union, are part of peripheral and insular Europe. The economies of these states demonstrate how flexibility and digitization can compensate for the small size of the domestic market.
With public debt at 83% of GDP but a huge GDP per capita thanks to the presence of multinational corporations from across the Atlantic, Ireland is a fiscal miracle. The 2008 banking crisis transformed Dublin into a global technology and finance hub. Extremely attractive tax policies (12.5% corporate tax) have attracted massive investment, but also criticism from the EU regarding “tax dumping.” Ireland is a clear example that fiscal flexibility can transform a peripheral state into an economic superpower.
With a debt of 52% of GDP, Malta is an economy based mainly on tourism, maritime technologies, and financial services. Thanks to flexible regulations, the island is an important center for online gaming and blockchain companies. Although its small size makes it vulnerable to external shocks, Malta has a high GDP per capita and a functional social system.
The Baltic countries are a good example of resilience and digitization. Estonia (21.4% debt) is a global pioneer in digital governance, with a 100% online e-citizenship and administration system. Latvia (39.9%) and Lithuania (38.3%) have dynamic economies with massive investments in IT, energy, and logistics. These countries went through severe crises in 2009 but recovered through reforms and innovation. Digitalization has become their symbol of resilience, and membership in NATO and the EU provides them with strategic stability.
Debt, solidarity, and the future of the European Union
After nearly seven decades of integration, the European Union is a mosaic of histories, cultures, and economic models. An analysis of member states’ public debt reveals a simple but profound reality: there is no single Europe, but rather several coexisting Europes. The level of debt reflects the economic structure and social priorities of each nation. The northern and western countries can sustain high levels of debt thanks to their productivity and trust in institutions, while the south and east, with low or moderate levels of debt, have structural vulnerabilities and social deficits. Social policies at the member country level can be characterized as ranging between generosity and sustainability. That is why the differences are huge. France, Sweden, and Denmark invest over 30% of their GDP in social protection, while Romania and Bulgaria barely exceed 20%. This asymmetry creates a Europe of inequalities, where the standard of living varies from €10,000 to over €60,000 per capita. Furthermore, the crises have not destroyed the Union but have strengthened it. But what are the challenges of the future? Firstly, from a demographic point of view, the aging population will put pressure on pension systems, and digitization will create ever greater differences between North and South if investment in education is not standardized. The ecological transition will generate huge costs, but also opportunities. However, without fiscal solidarity and a common fiscal policy, the eurozone will remain incomplete.
The future of the Union will lie between integration and identity. Europe faces a fundamental dilemma: can there be an economic union without a real political union? Everyday reality provides the answer: although tensions are rising, interdependence is too strong to allow fragmentation. That is why the European Union is today a complex body, built on compromise and adaptation. The public debt of the Member States is not just a matter of figures but reflects a collective history from post-war ruins to one of the most sophisticated economic constructions in the world. Western Europe offers stability, Northern Europe offers inspiration, Southern Europe reminds us of fragility, and Eastern Europe offers hope. Together, these regions make up a Europe which, although imperfect, remains the most ambitious experiment in economic solidarity in modern history.