The high public debt (whose sustainability improved significantly in the medium term with the measures adopted by the Eurogroup in June 2018) creates uncertainty about the country’s ability to service its debt in the long term, raising the cost of borrowing both for the public and for the private sector, and hampering growth prospects.
On top of all this, maintaining large primary surpluses over a prolonged period (e.g. 3.5% of GDP until 2022) impacts negatively on GDP growth. The restrictive effect of large primary surpluses is even more pronounced when accompanied by very high taxation, which increases the informal sector of the economy, and public investment spending under-execution.