Next Greece? IMF warns: U.S. debt ratio will soar past 143%!

The U.S. government’s debt burden is rapidly worsening, and for the first time this century will surpass that of Italy and Greece, European countries that once fell into crisis due to fragile public finances.

According to the latest forecasts from the International Monetary Fund (IMF), by 2030 the U.S. government’s total debt-to-GDP ratio will surge by more than 20 percentage points from the current level, reaching 143.4%, breaking records set after the pandemic.

The IMF estimates that the U.S. budget deficit will remain above 7% of GDP annually before 2030, making it the economy with the highest deficit ratio among all wealthy countries tracked by the agency. In contrast, the government debt burdens of Italy and Greece are expected to show a downward trend by the end of this century, as both countries strictly control budget deficits.

By 2030, the government debt ratios of Italy and Greece are both expected to trend downward, while the U.S. debt-to-GDP ratio will continue to rise. The U.S. Congressional Budget Office (CBO) estimates that this upward trend will continue for decades.

Although the United States enjoys the status of the world’s reserve currency and has borrowing power far exceeding European countries, this inflection point remains symbolically significant. Mahmood Pradhan, Global Head of Macroeconomics at Amundi Investment Institute, says this is a symbolic moment—according to CBO forecasts, U.S. debt will keep rising. This is the consequence of long-term deficits.

Debt Trajectories Reversal: U.S. Up, Europe Down

According to data published this month by the IMF, the U.S. government's total debt-to-GDP ratio will rise by over 20 percentage points from its current level, reaching 143.4% by 2030. This broad debt measure covers both central and local government debt and has remained below those of Italy and Greece since the start of this century.

Italy and Greece have long been warned about their fragile public finances by economists. Both countries were hit hard during the Eurozone sovereign debt crisis from 2010 to 2012, with Greece needing relief and debt restructuring under the supervision of the IMF and EU. But today, the situation has reversed—these two European countries are expected to see declining debt burdens by the end of this century through strict budget deficit controls.

James Knightley, economist at ING U.S., points out: “Many U.S. politicians and investors tend to look down on Europe for its slow growth and economic woes, but when you see indicators like this, the conversation changes.”

Trump Administration Failed to Reverse the Situation

The U.S. federal deficit expanded rapidly during the Biden administration, even though unemployment hovered near historic lows. IMF forecasts suggest officials believe the Trump administration made limited progress on resolving the issue.

Joe Lavorgna, economic advisor to U.S. Treasury Secretary Bessant, said this month that the Trump administration made progress in cutting spending and boosting revenues by imposing tariffs on imported goods. Lavorgna told the Financial Times that what is often overlooked is that most of the deficit improvement this year began in April.

Joe Gagnon from the Peterson Institute explains, “The political situation in the U.S. makes it difficult to see how anyone in power can reduce the huge deficit.” “Democrats don’t want to cut spending, and Republicans don’t want to raise taxes,” Gagnon said. “Both sides stick to these positions. I don’t know when this dynamic will change.”

Italy’s Fiscal Discipline Wins Approval

In contrast, Italy—even after long struggling to curb its debt burden due to weak GDP growth (IMF projects growth rates of just 0.5% in 2024 and 0.8% in 2026)—has won praise from foreign investors under Prime Minister Giorgia Meloni for efforts to reduce Rome’s budget deficit.

This year, Italy is expected to achieve a primary surplus of 0.9% of GDP, higher than the initial forecast of 0.5%. Rome expects its fiscal deficit to be 3% of GDP this year, compared to 8.1% when Meloni took office in 2022. This will let Italy exit the EU’s excessive deficit procedure a year ahead of schedule.

This month, DBRS Morningstar upgraded Italy’s sovereign rating from “A low” to “BBB high.” Analysts said that Italy’s efforts to strengthen public finances have benefited from more than €200 billion from the EU pandemic recovery plan. Carlo Capuano, Deputy Head of Scope Ratings’ sovereign team, noted that Italy also benefited from a recovering labor market and improved tax collection, partly due to increased use of digital payments.

Sustainability in Doubt

Another metric—net government debt (after offsetting financial assets)—shows that the U.S. will still have about 10 percentage points less debt than Italy by the end of this century. Gagnon says the net measure better reflects America’s true debt burden as it’s closer to what investors actually have to hold. “But the net figure is also rising,” he said. The IMF projects that Italy’s net debt will drop starting in 2028, but provides no net debt forecast for Greece.

Maury Obstfeld, former IMF chief economist and now a professor at UC Berkeley, says any prediction that U.S. fiscal conditions are sustainable “must be based on wishful thinking about future productivity growth, tariff income, demographics, or interest rates—or perhaps all of the above.”

Filippo Taddei, Senior European Economist at Goldman Sachs, says of Italy: “Fiscal policy continues to remain cautious.” This contrasts sharply with the United States. Although the U.S. enjoys stronger borrowing capacity thanks to its global reserve currency status, the persistent upward debt trajectory is triggering concerns about long-term fiscal sustainability.

Risk Warning and DisclaimerThe market involves risks; investment requires caution. This article does not constitute personal investment advice, nor does it consider individual investors’ specific investment objectives, financial situation, or needs. Users should consider whether any opinions, views, or conclusions in this article are appropriate for their own circumstances. Investing based on this content is at your own risk.