Economist Daniel Lacalle Warns of Eurozone Sovereign Debt Crisis

Daniel Lacalle warns that the euro area is more likely than the United States to trigger the next global sovereign debt crisis. While U.S. federal debt is projected at 101% of GDP in 2026, Lacalle argues the eurozone faces a larger hidden burden, with gross pension promises reaching roughly 371% of GDP.

Lacalle notes that eurozone member states borrow in a currency they do not control and lack the political will to cut spending, unlike the U.S., which holds the world reserve currency. Recent market signals, including soaring 10-year yields in France and Germany, suggest a global repricing of sovereign bonds driven by inflation risk and fiscal deterioration.

He contends that the European Central Bank's anti-fragmentation tools have merely transferred risk across all sovereign issuers. This leaves the monetary union vulnerable to a systemic shock if confidence in core economies like France and Germany continues to decline.