Greece is among the Eurozone economies least affected by prolonged high interest rates despite its heavy debt load, according to a report by Morningstar DBRS.
Stronger economic growth prospects, primary fiscal surpluses, and an expected ongoing decline in the debt to gross domestic product ratio are shielding the country from rising borrowing costs.
Greece is projected to maintain primary surpluses throughout the period from 2026 to 2030, curbing its future financing requirements and stabilizing its fiscal outlook.
Resilience across Southern Europe
The report by the credit rating agency evaluated the impact of a higher for longer interest rate environment on debt servicing costs and public debt dynamics across nine Eurozone member states: Greece, Germany, France, Italy, Spain, Portugal, Belgium, Austria, and the Netherlands.
The main conclusion of the analysis is that while rising bond yields increase pressure on sovereign finances, the impact varies significantly from nation to nation. Greece, Spain, and Portugal emerged as the least affected economies among the nine countries studied.
Morningstar DBRS, a credit rating agency that evaluates sovereign and corporate financial health, noted that fiscal performance and structural economic growth determine how effectively countries absorb monetary policy tightening across the European single currency block.
Structural pressures driving bond yields
Government borrowing costs across the Eurozone have escalated significantly in recent years. Following an extended era of exceptionally low interest rates, sovereign bond yields spiked in 2022 as an inflation shock prompted central banks to implement aggressive monetary policy tightening.
Nominal yields in most member states have continued to climb even as inflationary pressures subsided, returning generally to levels last observed in the early 2010s.
DBRS attributed this persistent upward trajectory to structural market forces rather than temporary cyclical pressures. The supply of government bonds has expanded dramatically as several advanced economies run large fiscal deficits while simultaneously refinancing higher overall stocks of sovereign debt.
Fiscal buffer and debt dynamics
A primary surplus occurs when government revenues exceed spending before accounting for interest payments on existing public debt. Maintaining primary surpluses helps governments reduce debt reliance and satisfy investors during periods of elevated global interest rates.
With central bank rates remaining elevated, DBRS expects ongoing structural bond issuances to maintain pressure on European borrowing costs, leaving fiscal discipline and economic expansion as the primary defenses against rising debt service burdens.
