Public Debt Sustainability and the Impact on Economic Growth

Abstract

In the current context, public debt has grown rapidly. This is due to the financial crises, the COVID-19 pandemic and geopolitical tensions at a global level. These critical moments influence stability and have a major impact on economic performance. The slowdown in economic growth is directly influenced by the value of public debt (Hilscher et al., 2022). For this reason, we analyzed from a theoretical, economic and political perspective the relationship between public debt and economic growth, highlighting the role of debt as an instrument of resilience, but also as a potential factor of vulnerability (Rahman et al., 2019). As part of the literature review, the VOSviewer program is used for bibliometric analysis of keywords, which allows the identification of the main research directions and connections between concepts such as “fiscal sustainability”, “economic growth” and “resilience”. The empirical analysis is based on statistical data from reliable international sources (Eurostat, World Bank), covering the period 2023–2024 and having as its main area of interest the Member States of the European Union. The results show considerable differences between European economies, with some countries managing to maintain a balanced ratio between the level of public debt and the dynamics of GDP (Eichengreen et al., 2019), while others are faced with major fiscal vulnerabilities and rising financing costs. The sustainability (Antonescu^1 & Florescu^1, 2024) of public debt does not depend exclusively on its level in relation to GDP, but especially on the way in which resources are allocated and transformed into productive investments, which confirms the essential role of responsible fiscal policies in strengthening resilience and supporting economic growth in the long term. JEL: H63, E62, O40