Europe's corporate debt landscape is a complex and multifaceted issue, with a surprising twist. While governments often take center stage in discussions about debt, the real story lies in the borrowing habits of companies. And the countries where firms owe the most are not your typical suspects. Let's dive into this intriguing topic and explore the factors at play.
The Debt Divide
The Eurostat data reveals a stark contrast in corporate debt across the European Union. Some of Europe's largest economies have relatively modest debt levels, while several smaller financial hubs top the ranking. This divide highlights the diverse economic structures within the bloc.
Measuring the Debt
The indicator used compares non-financial corporations' debt to each country's GDP. It includes bank loans and debt securities, excluding financial institutions. Loans between companies in the same country are also removed to avoid double counting. At the end of 2025, corporate debt stood at 70.1% of GDP across the EU, with the eurozone at 71.6%. These figures are near their lowest in almost two decades, indicating strong economic growth outpacing borrowing.
The 85% Warning Line
The European Commission's 85% GDP threshold is a crucial benchmark. Introduced after the global financial crisis and the eurozone sovereign debt crisis, it indicates potentially excessive private-sector borrowing. However, crossing this threshold doesn't automatically signal distress. Instead, it prompts the Commission to assess whether high debt reflects genuine vulnerabilities or structural factors.
The Top Seven
- Belgium (90.6% of GDP): Belgium's position is largely due to its role as a base for multinational companies managing internal financing. Many international groups established financing companies in Belgium for tax advantages, leading to intra-group financing rather than borrowing by Belgian operating companies.
- France (91.6% of GDP): France's elevated debt is considered a genuine macroeconomic issue. The Banque de France identifies French companies as the most indebted among eurozone economies, even after accounting for cash holdings. Debt-servicing costs are relatively high compared to European peers.
- Netherlands (106.3% of GDP): The Netherlands' high ranking is attributed to its role as an international financial center. Multinational companies account for around 60% of company debt, much of which is intra-group financing.
- Cyprus (107.3% of GDP): Cyprus follows a similar pattern, with companies having little real economic activity accounting for most international assets and liabilities. More than 80% of cross-border investment flows through special-purpose entities.
- Sweden (108.6% of GDP): Sweden's debt is mainly concentrated in commercial property, with real estate companies borrowing heavily during low interest rates. The sector became a financial vulnerability when interest rates rose sharply after 2022.
- Denmark (115.4% of GDP): Denmark's high debt is genuine, with its biggest international companies turning to international bond markets for expansion. Corporate bond borrowing has tripled in the past five years, held by foreign investors.
- Luxembourg (251.1% of GDP): Luxembourg stands alone with company debt exceeding two and a half times its annual economic output. The country's central bank clarifies that this figure reflects its role as a leading international corporate finance center, not excessive borrowing by domestic businesses.
The Unexpected Leaders
Interestingly, Italy and Greece, with the highest public debt burdens, have relatively low corporate debt. Debt is primarily concentrated in the public sector, well below the EU average.
Small Countries, Big Impact
Four of the top five countries—Luxembourg, the Netherlands, Cyprus, and Belgium—are small economies. Their role as international financial hubs explains this phenomenon. These countries host holding companies and financing vehicles used by multinationals to manage investments across borders, often with limited economic activity in the host country.
Unraveling the Ranking
At first glance, the data suggests a concentration of indebted companies in Luxembourg, Cyprus, and the Netherlands. However, the picture changes when international financing centers are considered. France emerges as a notable outlier, the only major European economy with both high public debt and genuinely elevated corporate indebtedness.
Conclusion
Europe's corporate debt ranking reveals a complex interplay between multinational financing practices and domestic borrowing. While smaller countries dominate the top of the list due to their role as financial hubs, France stands out as a major economy with genuine corporate debt concerns. This analysis underscores the importance of understanding the underlying factors driving debt levels and their implications for the broader economy.
