Government Debt Rises Across Euro Area and EU in Q2 2025, Cyprus Sees Significant Drop

Government debt as a percentage of gross domestic product (GDP) increased across both the euro area and the wider European Union (EU) at the close of the second quarter of 2025, according to a report released by Eurostat on Tuesday. The statistical office highlighted, however, that Cyprus recorded one of the most notable decreases over the year.

For the 20-nation euro area (EA20), the general government gross debt to GDP ratio reached 88.2 per cent at the end of Q2 2025, rising from 87.7 per cent at the end of Q1 2025. The ratio for the entire EU also increased, moving from 81.5 per cent to 81.9 per cent over the same period. Year-on-year comparisons show that government debt to GDP ratios rose in both the euro area, from 87.7 per cent in Q2 2024 to 88.2 per cent in Q2 2025, and the EU, from 81.2 per cent to 81.9 per cent.

Looking at individual member states, Greece recorded the highest government debt to GDP ratio at 151.2 per cent, followed by Italy at 138.3 per cent, France at 115.8 per cent, Belgium at 106.2 per cent, and Spain at 103.4 per cent. At the lower end of the spectrum, Estonia reported a ratio of 23.2 per cent, Luxembourg 25.1 per cent, Bulgaria 26.3 per cent, and Denmark 29.7 per cent.

Compared with Q1 2025, fifteen member states experienced an increase in their debt to GDP ratio by the end of Q2 2025, while twelve saw a decrease. The largest quarterly increases were observed in Finland (+4.3 percentage points – pp), Latvia (+2.7 pp), Bulgaria (+2.6 pp), Portugal (+1.8 pp), France (+1.7 pp), and Romania (+1.4 pp). Conversely, the largest decreases were recorded in Lithuania (-1.4 pp), Ireland (-1.2 pp), and both Greece and Luxembourg (each -1.1 pp).

Over the year from Q2 2024 to Q2 2025, sixteen member states registered an increase in their debt to GDP ratio, while eleven reported a decrease. Cyprus stood out with the third-largest annual reduction in its debt-to-GDP ratio. The largest decreases over this period were observed in Greece (-8.9 pp), Ireland (-7.2 pp), Cyprus (-6.5 pp), Denmark (-3.5 pp), and Portugal (-2.3 pp). Meanwhile, the largest increases were recorded in Finland (+7.8 pp), Poland (+6.1 pp), Romania (+5.8 pp), Bulgaria (+4.3 pp), France (+3.5 pp), Slovakia (+2.7 pp), Italy (+2.3 pp), and Latvia (+2.0 pp).

At the end of Q2 2025, general government debt in the euro area consisted of 84.2 per cent debt securities, 13.2 per cent loans, and 2.5 per cent currency and deposits. In the EU as a whole, the composition was similar, with 83.7 per cent debt securities, 13.8 per cent loans, and 2.5 per cent currency and deposits.

Eurostat also publishes quarterly data on intergovernmental lending (IGL), reflecting the involvement of EU member states’ governments in lending to certain member states. At the end of the second quarter of 2025, IGL as a percentage of GDP stood at 1.4 per cent in the euro area and 1.2 per cent in the EU.

By fLEXI tEAM