It's September but it's already October. European bond yields are set to rise above 5%.

Public debt in Europe is becoming more expensive, with bond yields surpassing **5%**, a sign that inflation could persist due to borrowing policies.

The landscape of public debt in Europe is shifting. Bond yields, especially on longer maturities, are climbing and now sit above **5%**. This is no coincidence, but a clear signal that markets anticipate a period of high and sustained inflation.

## The cost of public debt

When countries issue debt — that is, borrow money from investors in exchange for paying interest — they are committing future funds. If interest rates rise, as is happening now, the cost of that debt soars. Refinancing maturing debt means issuing new debt at higher rates. That extra money spent on interest is no longer available for other essential items such as infrastructure, healthcare, education or defence. In short, it is money that ends up in the hands of bondholders instead of being invested in improving citizens' lives.

## Policies and their consequences

This situation has its roots in the economic policies of recent years. The promotion of public borrowing, often driven by political parties of various stripes, has led to debt levels that are now starting to take their toll. One way to mitigate the impact of growing debt without drastically degrading public services is either to raise taxes or to try to increase the productive or population base to dilute the problem. However, the strategy most often implemented, more or less consciously, is to generate inflation. Inflation, by eroding the value of the currency, reduces the real value of accumulated debt over time.

## What to do about inflation?

In this scenario, where inflation seems to be the answer to runaway public borrowing, investors seek refuge in assets that have historically held their value or even increased it during inflationary periods. Gold, property or certain crypto-assets, with a limited supply not subject to massive money printing, present themselves as alternatives. The current situation suggests we could be facing several years of high inflation, something not seen in decades.