FRANKFURT(AFP) -The eurozone’s new year heralds a debt crisis that has alarm bells ringing and markets tracking government plans to tame the growing shortfall. Officials have borrowed heavily to pull the 16-nation zone out of its first recession and debt levels are set to smash a huge hole in the ceiling set by the European Union in its Stability and Growth Pact. Soaring budget deficits, low growth and banking sector support «are feeding into significantly higher public debt levels,» the European Commission has warned. Average eurozone «public debt could reach 84 percent of GDP (gross domestic product) by 2010, an increase of 18 percentage points from 2007,» it said, far above the pact’s limit of 60 percent. Government debt ratings have been downgraded in Greece by all three major international agencies, and by some of them for Ireland and Spain as well. The Fitch agency has urged all governments with top ratings to tame debt, mentioning in particular Britain, which is not a eurozone member, along with France and Spain, which are. Germany, long considered the cornerstone of eurozone fiscal discipline, forecasts public debt at around 78 percent of GDP this year, while in France, the second biggest eurozone economy, public debt jumped to a record 75.8 percent in the third quarter of 2009. Greece says its shortfall will come to 120 percent of output in 2010. Debt is raising the cost of borrowing for many countries and adding to the weight of reimbursing obligations on future budgets. With unemployment rising and weak growth expected in 2010, officials cannot count on increased tax revenues for much help in paying down debt, much which is owed abroad. «The (economic) crisis is weighing on the sustainability of public finances and potential growth,» the EU Commission has warned, as economists leave open the possibility of a «double dip» recession this year. Finances will be undermined further by an aging population that will need expensive healthcare in the years to come. But tightening the financial screws, as many capitals have pledged to do, could choke off an economic recovery if officials act too soon, analysts warn. Natixis economist Patrick Artus said that in the near term, «it will not be possible to return to less expansionary monetary policies, at the risk of creating huge problems,» as money pumped out to boost activity has begun to generate fresh problems of its own. These include new speculative bubbles in emerging economy assets, commodities and possibly even real estate, a key factor in the mid-2008 financial meltdown.