The Weekly Worldview: Europe‘s Hard Fiscal Choices

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The Weekly Worldview: Europe‘s Hard Fiscal Choices

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July 20, 2026 04:01 AM GMT

Morgan Stanley & Co. LLCMGlobal Economic Briefing | North America Seth B Carpenter

Chief Global Economist

The Weekly Worldview: Seth.Carpenter@morganstanley.comMorgan Stanley Europe S.E. +1 212 761-0370

Jens Eisenschmidt

Chief Europe EconomistEurope's Hard Fiscal Choices Jens.Eisenschmidt@morganstanley.com +49 69-21662817

Europe’s fiscal arithmetic has changed: ageing populations, Morgan Stanley & Co. International plc

Skander Garchi Casal

Economistdefence and debt costs are colliding with rigid budgets. Growth

Skander.Garchi.Casal@morganstanley.com +44 20 7425-0034

becomes the key factor that will determine how difficult the

fiscal choices will be. Morgan Stanley & Co. International plc (DIFC Branch)

Rajeev Sibal

Senior Global Economist

Rajeev.Sibal@morganstanley.com +971 4 709-7201MResearch is not always about uncovering new facts. Our recent BluePaper on

Morgan Stanley & Co. LLC

European fiscal policy is about taking well-known facts but getting a new signal. Arunima Sinha

There is little new about Europe’s aging population, rising defense spending, or Global Economist

Arunima.Sinha@morganstanley.com +1 212 761-4125

rising interest costs. Nor is it new that Europe has had a large amount of social

spending for decades. But taking these facts together suggests that Europe is Morgan Stanley MUFG Securities Co., Ltd.

Chiwoong Lee

entering a new fiscal regime, and that fact forces us to focus on long-term growth. Principal Global Economist

Chiwoong.Lee@morganstanleymufg.com +81 3 6836-8920

For the last 60 years or so, European governments enjoyed unusually powerful

fiscal tailwinds. Sustained growth against a backdrop of falling defense spending Morgan Stanley & Co. LLC

Mayank Phadke, CFA