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15 Rev. Eur. Stud. 31 (2023)
Public Debt and Economic Growth after COVID-19 in Europe: Challenges and Policy Implications

handle is hein.journals/rveurost15 and id is 251 raw text is: Review of European Studies; Vol. 15, No. 4; 2023 ISSN 1918-7173 E-ISSN 1918-7181 Published by Canadian Center of Science and Education Public Debt and Economic Growth after Covid-19 in Europe: Challenges and Policy Implications Dimitra Mitsi 1 Ministry of Finance, Peloponnese, Tripolis, Greece Correspondence: Dimitra Mitsi, 15 Diotimas Street, Peloponnese, Tripolis, Greece. E-mail: mitsidimitra2@gmail.com Received: July 13, 2023 Accepted: November 8, 2023 Online Published: November 29, 2023 doi:10.5539/res.v15n4p31 URL: https://doi.org/10.5539/res.vl5n4p31 Abstract The Covid-19 pandemic has had a profound impact on European economies, leading to a significant increase in public debt levels. This paper examines the challenges and policy implications of managing public debt and fostering economic growth in Europe post-Covid-19. It provides a conceptual framework by defining and measuring public debt, exploring the relationship between public debt and economic growth, and highlighting the role of public debt in times of crisis. The paper analyzes the impact of Covid-19 on public debt in Europe, including the fiscal response, debt accumulation, and reasons for increased debt levels. It further discusses the challenges posed by high public debt, such as debt sustainability, crowding out private investment, financial stability risks, and constraints on future fiscal policy. The study then presents policy implications for balancing public debt and economic growth, including fiscal consolidation measures, long-term debt management strategies, prioritizing public investments, implementing structural reforms, considering monetary policy, and fostering international cooperation. Additionally, the paper provides case studies of selected European countries, evaluating their approaches, assessing policy effectiveness, and drawing key lessons and best practices. Finally, the paper concludes with a summary of key findings, policy recommendations for European governments, and suggestions for future research directions. Keywords: Covid-19, public debt, economic growth 1. Introduction The Covid-19 pandemic has had a significant and far-reaching impact on economies worldwide, including those in Europe. Governments across the region have implemented unprecedented measures to mitigate the health and economic consequences of the pandemic. These measures, such as lockdowns, business closures, and income support programs, have required substantial financial resources, leading to a significant increase in public debt levels. The surge in public debt raises important challenges and policy implications for European economies as they navigate the post- Covid-19 recovery phase. Balancing the need for economic growth and stability with the imperative of managing and reducing public debt becomes a critical task for policymakers. This paper aims to explore the challenges and policy implications associated with public debt and economic growth in Europe after Covid-19. The structure of the paper follows a logical progression to address the objectives outlined in the introduction. The first section examines the impact of Covid-19 on public debt in Europe, discussing the fiscal responses to the pandemic, the increase in public debt levels, and concerns related to debt sustainability. The subsequent section explores the challenges to economic growth in the post-pandemic era. It analyzes the short-term economic contraction experienced during the pandemic and the potential long-term structural implications on growth. It also delves into the dynamics of the labor market and the hurdles faced in recovering employment levels. Moving on, the paper discusses policy implications for public debt management. It explores various strategies that can be employed to effectively manage public debt, including fiscal consolidation, debt sustainability frameworks, revenue enhancement measures, and expenditure rationalization and efficiency. Next, the paper focuses on strategies for promoting economic growth amid high public debt. It examines the importance of investment in infrastructure and innovation, enhancing human capital, implementing structural reforms, and seeking international collaboration and support. To provide practical insights, the paper includes case studies from selected European countries such as Germany, Italy, Spain, and Sweden. These case studies offer real-world examples of the challenges faced by different nations and the strategies employed to manage public debt and foster economic growth post- Covid-19. Finally, the conclusion summarizes the key findings of the paper, presents policy recommendations based on the analysis, and identifies potential avenues for future research in the field. 31

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