Greece's public debt is projected to continue declining over the next decade, even under a severe adverse scenario involving escalating Middle East tensions and rising energy prices, according to a new European Stability Mechanism report.
The ESM's Euro Area Stability Watch report modeled a scenario involving renewed conflict escalation in the Middle East, higher energy prices, and a significant drop in U.S. stocks and bonds that would hit European investors.
Combined, the shocks would push the eurozone into recession, with GDP contracting 0.4% in 2027 and inflation nearing 5%. Under this scenario, public debt would rise across the eurozone by 2035 in every country except Greece and Cyprus, where it would still fall.
The ESM's baseline scenario projects eurozone debt climbing to 103% of GDP over the next decade, up from nearly 90% last year, driven by aging populations, defense spending rising to 3.5% of GDP, higher borrowing costs and sluggish growth.
Greece, however, is expected to keep reducing its debt load.
Greek debt fell faster than any other eurozone country in the first quarter of 2026, dropping to 143.5% of GDP — down 9.4 percentage points year-on-year, according to Eurostat, while the eurozone average rose to 88.9%.
The International Monetary Fund projects Greek debt will fall to 110.9% of GDP by 2031, from 145.7% last year, putting it below France, Belgium and Italy.
The trend has kept Greek bond yields relatively contained amid global volatility; Greece's 10-year yield stood at 3.92% Thursday, below France's and Italy's, both above 4%.