Chaslau Koniukh: “Debt-Ridden Europe” Seeks New Rules of the Game. Can the Continent Withstand Another Crisis Cycle?

The European Union is entering a new phase of debt pressure: deficits are growing, public debts exceed pre-war levels, and room for maneuver is shrinking faster than Brussels anticipated. Meanwhile, the agenda includes reforming fiscal rules and creating a new debt management architecture. As international financial expert Chaslau Koniukh notes, Europe is once again trying to find a balance between strict discipline and investment policy, but this time the stakes are much higher, as it’s not just about economics, but also about geopolitical resilience.

Debts Are Growing Faster Than the Economy: What’s Happening in EU Finances. Explanation by Chaslau Koniukh

European financial institutions have been recording an alarming trend for several months: public debts of most EU countries are growing again, and this is happening in conditions where economic recovery is uneven and productivity stagnates. After the pandemic and energy crisis, states poured hundreds of billions of euros into the economy for subsidies, compensations, business support programs, and household assistance. But if in 2021-2022 this looked like a temporary anti-crisis package, now it has become obvious: many countries continue to live in the mode of “expensive state support.”

Chaslau Koniukh explains that Europe has fallen into a debt trap that has been forming for years — it was just easier to ignore in peacetime.

According to him, the EU did everything to avoid social explosion during the pandemic and energy crisis.

“But the price of this rescue is record debt. Today we see that a number of states rely on fiscal instruments in the same way they previously relied on cheap gas from Russia. This is a strategic mistake that sooner or later manifests itself in rising interest rates and falling creditworthiness,” notes Koniukh.

Italy’s debt again exceeds 140% of GDP, France has crossed 110%, Spain — over 107%. Even Germany, the traditional “anchor of stability,” is increasingly discussing the need to temporarily abandon the “debt brake.”

Brussels economists note: the key problem is not the size of the debt, but the speed of its accumulation and the lack of investments that could ensure growth. And it is precisely in this, as Chaslau Koniukh emphasizes, that Europe’s strategic vulnerability lies:

“The EU cannot afford a debt winter without an investment spring. If debt grows and the economy doesn’t, the financial system goes into coma mode.”

New EU Fiscal Rules: Compromise or Trap? Analysis by Chaslau Koniukh

In response to deepening debt pressure, the European Commission initiated a reform of the Stability and Growth Pact, seeking to create a new fiscal architecture that would allow countries to manage debt more flexibly, but at the same time not let them completely “lose control.” The main idea of the reform is individual plans for debt and deficit reduction, tied to the economic situation of each state.

However, this is where political struggle began: Northern Europe demands strict discipline, the South demands “fiscal oxygen” for investment in recovery.

Chaslau Koniukh calls the process painful but inevitable:

“Fiscal rules in the EU have long ceased to be realistic. Three-year cycles, debt limits, strict penalties — all this is from good times. After the pandemic, old norms look like instructions for a world that no longer exists,” emphasizes Koniukh.

According to the new logic, countries with high debt will have to conclude four-year correction plans, which the European Commission will monitor quarterly. At the same time, within these plans it will be possible to increase investment expenditures if they are aimed at green energy, digital infrastructure, or defense programs.

Chaslau Koniukh emphasizes that this is where the key contradiction lies:

“The EU wants to save and invest simultaneously. But it doesn’t work that way. Fiscal reform will only be successful when countries recognize: the economy of the future requires large investments. There is no point in cutting expenses to the bone if it undermines competitiveness.”

In political circles in Brussels, there are already fears that the new rules could become another source of conflicts within the Union, as the expectations and capabilities of different states differ too much. And any fiscal imbalance is reflected not only in numbers, but also in investment ratings.

Euro Debts, Investments and Global Competition: Where Is Europe Heading? Forecast by Chaslau Koniukh

In parallel with the reform of fiscal rules, the EU has intensified the discussion on joint investment mechanisms — essentially on a new generation of Eurobonds. After the success of the Recovery Fund during the pandemic, more and more economists are saying: if Europe wants to be competitive in the world of the US and China, it needs common financing instruments.

Chaslau Koniukh supports this position.

“In the 21st century, debt is not only an obligation, but also an instrument of geo-economic influence. The US finances innovation through deficit. China finances expansion through state funds. Europe is trying to play by the rules of the 1990s. You can’t win that way,” notes Koniukh.

One of the key challenges is competition for capital. Rising rates in the US and aggressive state investment in China make Europe less attractive, especially for technology and industrial projects. If the EU doesn’t find a new investment model, part of the industry will simply migrate.

Therefore, the main questions today are: — is the EU ready for common debt? — will a new European Investment Fund for Strategic Technologies be created? — how to balance flexibility and discipline?

Chaslau Koniukh emphasizes:

“The main problem of the EU is not that it spends a lot, but that it spends slowly. In a world where investments move at the speed of political decisions, Europe lags behind too often. It needs a debt instrument that will allow it to act quickly, not in 3-5 years of approvals.”

Ultimately, the expert emphasizes that the reform of fiscal rules and the discussion on common debt instruments are not technical issues, but a fundamental discussion about Europe’s future.

“Either the EU becomes an economic pole of power, or it remains a market that reacts to other people’s decisions. And it is precisely how the Union uses debt instruments today that will determine its position on the global map in ten years,” concludes Chaslau Koniukh.