The BIFs, the three new 'sick' debt countries in Europe

BarcelonaThree of the major European economies –France, Italy, and the United Kingdom– are the three new headaches in European debt markets. The three countries are in the investors' crosshairs due to the high cost their governments pay to issue public debt, even though on paper and historically they are three states with solid economies.

The British newspaper Financial Times, has even found an acronym for the three countries in trouble: BIF (from the English acronym for Britain, Italy, France). The English acronym sounds very similar to the word beef (beef) and recalls another fashionable acronym during the European debt crisis between 2011 and 2015, PIIGS, the English initials of the EU member states that went through the most financial difficulties during that period: Portugal, Ireland, Italy, Greece, and Spain. Just like with beef now, PIIGS is pronounced like pigs, which means pigs. From Southern Europe, this acronym was put forward as an example of the intolerance and, in large part, racism towards the most indebted countries by politicians from the north of the continent and leaders of European institutions.

The data shows it. If we look at the risk premium –the difference between what a European government pays in debt interest and what Germany, the continent's largest economy, pays– the three mentioned countries have been above Spain's for more than a year. This would have been unthinkable a decade ago, when Spain was considered one of the sick men of the euro area. In February of this year, Germany paid an annual interest of 2.75% on its 10-year bond, while Spain had an interest of 3.18. France and Italy, on the other hand, paid around 3.4%, and the United Kingdom, one point more, 4.4%.

This places the Spanish risk premium at 0.4 percentage points, while the French and Italian are around 0.6 points and the British, at almost 1.7 points.

Two variables explain this change in the countries in the crosshairs of the debt markets. The first is that the three BIF states "have very high debt," points out Joan Ribas, professor of economics at Pompeu Fabra University. And the second is that they have very low growth rates in their respective economies. Both things together create a kind of vicious circle that is difficult to break.

A country's public debt is calculated as a percentage of gross domestic product (GDP, the indicator that measures the size of an economy). Thus, if a territory has a public debt of 200 million and a GDP of 1,000 million, the ratio will be 20%. According to data from Eurostat, the European statistics agency, for the third quarter of 2025, for the 21 countries in the euro area as a whole, this percentage is 88.1% and only six countries exceed this figure. Two of these are precisely Italy and France, with 137.8% and 117.7%, respectively, only surpassed by Greece, with 149.7%. The other three are Belgium, Spain, and Portugal.

The second difference, however, is the aforementioned economic growth, i.e., GDP. Italy and France – like Germany – emerged from the crisis caused by the pandemic more quickly than the southern European countries, but subsequently suffered more stagnation, especially following the energy and inflationary crisis derived from the Russian invasion of Ukraine in February 2022. In contrast, states like Greece, Spain, or Portugal have been able to cope better, either because the energy crisis impacted them less or because their economic models have allowed them to achieve higher GDP growth rates than their northern neighbors, even if, as in the case of Spain, growth is mainly due to the increase in the active population in low value-added sectors, such as trade or tourism.

Not going any further, between 2023 and 2025 the French economy increased by 3.4% and the Italian by 2.2%, while the Spanish economy grew by more than 9% in the same period. In the case of the British economy, the results are also not very good, with public debt to GDP exceeding 101% and an accumulated growth of 2.7% in three years.

In the case of the United Kingdom, however, there is an additional weakness: "With Brexit, the shot backfired on them," recalls Ribas. Leaving the European common market has meant an extra brake on the country's economic activity, because some companies have lost clients and access to potential clients, and also because being outside the EU and maintaining it as the main trading partner has increased the costs of importing and exporting with the rest of the continent.

With this situation, the governments of the different three BIF states have not been able to significantly reduce debt levels and, with the economy growing at a low rate and, by extension, with public administrations earning little in taxes, public deficits – the difference between what the state spends and what it earns in a year – have remained high and have been added to the debt.

The problem of inflation

In the context of recent years, another variable must be added: the growth of prices since 2022. First with the reactivation of the economy at the end of the pandemic, then with the war in Ukraine and currently with the conflict in the Persian Gulf, the world economy has suffered various supply shocks that have pushed prices up at a rate not seen in over forty years. The response of central banks, both the European Central Bank and the Bank of England, was to increase interest rates, a fact that has not helped governments at all in cleaning up public finances.

When prices rise, central banks – bodies independent of the government – usually increase the economy's interest rates. This means that banks have to pay more to borrow money from the central bank and pass this additional cost on to their customers when they grant them loans. This causes companies to invest less and families to spend less, as borrowing money from the bank is more expensive, which cools economic activity and, consequently, prices fall.

This orthodox policy has limitations when inflation is caused by external supply shocks, such as the rise in the price of oil due to a war. Therefore, although it can help lower the prices of the economy, it also has a negative effect on economic growth.

Furthermore, the interest rates paid by governments to borrow are closely linked to the interest rates set by the central bank for its economy. If a central bank raises rates, government borrowing costs can be expected to increase. "Debt is manageable if rates are not high. Then, it's like paying a mortgage, which is chewed up," recalls Ribas. If, on the contrary, rates increase, the debt becomes more difficult to pay.