Europe is entering a period in which economic weakness, political instability, social discontent and military insecurity are converging. Each problem on its own could be addressed. Their simultaneous emergence, however, limits the scope for a response and increases the risk of a broader crisis. In the current circumstances, I believe the risk of a serious European crisis has risen significantly. It is not inevitable, but the convergence of these pressures makes early preparation necessary. The aim is to limit its scale, duration and consequences. This time, the risks appear broader than those of the previous financial crisis and European sovereign debt crisis of 2009-2010.
Then, the turmoil began in the financial system and spread to public finances, production and employment. Today, economic difficulties are compounded by wars, energy insecurity, technological competition and deeper political fragmentation. Pressure is being felt simultaneously in France, Germany, Italy and Spain, the eurozone’s four largest economies. This does not prove that the next recession will be deeper. It does, however, suggest that the overall consequences of a new crisis could be greater and that it may be harder to tackle.
During the previous crisis, Europe could look to stabilising the financial system and gradually restoring confidence. Today, intervention in the banking sector or bond markets is not enough to address an energy disruption, military escalation and a loss of productive competitiveness at the same time. Governments are also being called on to fund defence, an ageing population and technological modernisation while maintaining social protection. If they resort to across-the-board cuts, they risk weakening demand and social consensus. If they increase borrowing without restraint, they undermine their future resilience. The picture becomes clearer when we look at how these pressures are playing out in the eurozone’s four largest economies.
France offers the most immediate warning sign. According to France’s statistics office, INSEE, public debt reached 119% of GDP in the second quarter of 2026, while the budget deficit in 2025 was 5.1%. Political uncertainty ahead of the 2027 presidential election is making decisions to restore fiscal balance more difficult. On 5 October, Reuters linked the euro’s fall to a 17-month low against the dollar to concerns about French public finances. The inability to reach political agreement is already carrying an economic cost.
Prolonged turmoil in France would affect the entire eurozone. Higher borrowing costs reduce the resources available for investment and social services, and can place a further burden on banks and businesses. At the same time, a weaker euro makes energy and raw material imports priced in dollars more expensive. Fiscal difficulties can therefore fuel rising prices, while higher prices can intensify social discontent, making political decisions even harder.
While pressure in France is being felt mainly in public finances and markets, the central problem in Germany is the difficulty of regaining its role as a powerful engine of the European economy. After two years of recession, growth in 2025 was just 0.2%. Reuters reported on 2 October 2026 that the German government was set to raise its growth forecast from 0.5% to 1.3% for 2026 and from 0.9% to 1.1% for 2027. The prospect of this revision offers some hope, but does not remove the country’s production and political difficulties. The rise of the AfD in regional elections in September shows the depth of discontent. As confidence within Germany weakens, it also becomes harder to set a stable course for Europe.
In Italy, pressure combines public debt of 138.9% of GDP in the first quarter of 2026 with long-standing productivity weaknesses. An ageing population is increasing demand for pensions and healthcare, while the gradual decline in the active population is limiting the scope to increase output. Government stability offers room for action, but high debt, combined with falling industrial output and inflation at 4.2%, limits the country’s resilience to further shocks.
Spain highlights a different aspect of Europe’s problem: the gap between positive economic performance and people’s everyday experience. In May, the Commission forecast growth of 2.4% for 2026, but stronger economic performance did not ensure political calm. The housing crisis and the inability to secure parliamentary support for tackling it led Pedro Sánchez to announce an early election. The message extends beyond Spain. GDP growth loses its political significance when people struggle to find a home and secure a decent standard of living.
The different pressures facing the four economies are converging in an adverse European environment. The Commission’s spring forecast put growth at just 0.9% and inflation at 3% in the eurozone in 2026. The combination of low growth and persistent price pressures is squeezing real incomes, hindering investment and increasing demands on government budgets. The scope for easy solutions is narrowing.
Social resilience has already been tested. According to Eurostat, 92.7 million people in the EU were at risk of poverty or social exclusion in 2025.
When work offers no prospect of improvement and the middle class feels it is losing ground, economic insecurity turns into distrust of institutions. A new crisis would find a significant part of society already tired and sceptical.
In these circumstances, the military dimension takes on particular importance. The war in Ukraine sustains the risk of escalation, while increased defence needs are competing for resources from already strained budgets. NATO’s commitment to spending 5% of GDP by 2035 includes at least 3.5% for core defence needs and up to 1.5% for security and resilience spending. This commitment makes long-term planning more urgent. Deterrence, however, requires ammunition production, equipment maintenance, secure supplies and the ability to make joint decisions. A politically divided and economically weakened Europe will struggle to meet these demands. The risks also include cyberattacks and disruptions to energy, telecommunications and transport networks, which can hit the economy without a full-scale war.
Preparation at every level is therefore essential. Politically, this means agreement and continuity in the functioning of the state. Socially, it means protecting essential services and vulnerable incomes. Militarily, it means credible deterrence and effective civil protection plans. Above all, economically, resilience must be strengthened before options narrow.
For Greece, two priorities are critical. First, ensuring continuity of financing for the state and the economy, with adequate available funds, planning for borrowing needs and plans to maintain financing for viable businesses. Second, securing production and supply, through alternative energy sources, protection of critical infrastructure and stocks of essential goods.
Let us take action in good time, in the hope that it will not be needed in practice.
* Michalis Sallas is chairman of Lyktos Group, honorary chairman of Piraeus Bank and a former university professor. This article was first published in To Vima tis Kyriakis.