EU Deficits/Debt 2010: The latest budget deficit
and debt for the EU27 published
today by the EU statistics office Eurostat, shows Ireland at a
debt to GDP (gross domestic product) ratio of -32.4%, Greece at -10.5%, the United
Kingdom (UK) at -10.4% followed by Spain at -9.2%.
Sweden was in balance.
In 2010, the government deficit of both the
Eurozone (EA17) and the EU27 dropped compared with 2009, while the
government debt and GDP increased.
In the Eurozone the government deficit to GDP ratio fell from 6.3% in 2009 to 6.0% in 2010, and in the EU27 from 6.8% to
6.4%. In the Eurozone the government debt to GDP ratio increased from 79.3% at the end
of 2009 to 85.1% at the end of 2010, and in the EU27 from 74.4%
Ireland's huge deficit included bailout
costs related to Anglo Irish Bank and Irish Nationwide Building
Eurostat added around €4bn to the UK's deficits over the past four years saying
it had 'reservations' over military spending and domestic bank bailouts of
Northern Rock and the Bradford and Bingley building society.
The reported debt figures are increased by £32.4bn (2.24% of GDP) in
2008 (as well as in financial year 2008/2009), by £20.0bn (1.43% of GDP)
in 2009 (as well as in financial year 2009/2010) and by £56.8bn (3.89% of
GDP) in 2010 (as well as in financial year 2010/2011).
Greece's deficit was raised to
10.5% of GDP compared with the target of 8.1% of GDP agreed as part of the
EU-IMF bailout, down from 15.4% in 2009.
Eurostat said the largest government deficits in
percentage of GDP were recorded in
Ireland (-32.4%), Greece (-10.5%),
the United Kingdom (-10.4%), Spain (-9.2%),
Portugal (-9.1%), Poland (-7.9%),
(-7.9%), Latvia (-7.7%), Lithuania
(-7.1%) and France (-7.0%). The lowest deficits were recorded
in Luxembourg (-1.7%), Finland (-2.5%) and
Denmark (-2.7%). Estonia (0.1%)
registered a slight government surplus in 2010 and Sweden (0.0%) was
in balance. In all, 21 Member States recorded an improvement in their government
balance relative to GDP in 2010 compared with 2009 and six a worsening.
At the end of 2010, the lowest ratios of government debt to
GDP were recorded in Estonia (6.6%),
Bulgaria (16.2%), Luxembourg
(18.4%), Romania (30.8%), Slovenia (38.0%),
Lithuania (38.2%), the Czech Republic
(38.5%) and Sweden (39.8%). Fourteen Member States had government debt ratios higher
than 60% of GDP in 2010: Greece (142.8%),
Italy (119.0%), Belgium (96.8%),
(96.2%), Portugal (93.0%), Germany (83.2%),
France (81.7%), Hungary (80.2%),
the United Kingdom (80.0%), Austria (72.3%), Malta
(68.0%), the Netherlands (62.7%), Cyprus (60.8%)
In 2010, government expenditure
in the Eurozone was equivalent to 50.4% of GDP and government revenue to 44.4%. The figures for the EU27 were 50.3%
and 44.0% respectively. In both zones, the government expenditure ratio
decreased between 2009 and 2010, while the government revenue ratio remained
Marie Diron, senior economic
adviser to the Ernst & Young Eurozone Forecast (EEF), comments: "Today's
data on 2010 public debt and deficits in the Eurozone provide a stark reminder
of the steep road ahead. At the Eurozone level, the deficit was twice the
Maastricht threshold last year, at 6% of GDP. This was only slightly less than
in 2009 and these two years recorded the largest deficits since at least 1970.
The small dent in the deficit last year was far from sufficient to rein in debt
that increased to more than 85% of GDP.
"But the main concerns are not about the Eurozone aggregate results which are
less bad than, for instance, the equivalent US ratios. Concerns focus on a few
countries instead. In particular, today's release includes the latest upward
revision to the Portuguese deficit data. While we were initially told that the
government had met its objective of bringing the deficit down to 7.3% of GDP,
two waves of revisions later we now learn that the deficit was much larger at
9.1% of GDP last year. These revisions are bad news in two respects. First, they
imply that the task to bring the deficit down is much larger than initially
envisaged. Second, they undermine the credibility of data on public finances in
Portugal in particular and in peripheral countries in general. Low credibility
implies higher risk premia which makes the risk of restructuring higher.
Peripheral countries need to convince markets and analysts that the numbers in
their austerity plans add up. This will take a long time.
"While last year was a year of announcements, fiscal austerity starts in earnest
this year. Fiscal austerity is one main factor behind our forecast of subdued
growth in the Eurozone. We know that it will hit growth in peripheral countries
hardest and we forecast falling or, at best, stagnant GDP in these countries.
But even outside the periphery, some countries need quite a drastic tightening
of public finances. France and Slovakia are worst placed with deficits at 7% and
7.9% of GDP last year. Announcements so far have fallen short of a convincing
plan to bring the deficits and hence debt back under control. By contrast,
Germany with a deficit at only 3.3% of GDP has some room to proceed with only a
moderate tightening. But the government looks set on restoring fiscal balance as
soon as possible.
"Today's data also highlight the tight links between the public and financial
sector. Large contingent liabilities, worth 6.5% of GDP, imply that a worsening
of the situation in the banking sector would imply significant costs to the
public purse. One can imagine a vicious circle whereby a worsening in public
finances has a negative impact on banks' balance sheets which requires
government bailout of some institutions which in turn worsens public finances
Eurozone (EA17): Belgium, Germany,
Greece, Spain, Estonia, France, Ireland, Italy, Cyprus, Luxembourg, Malta,
Netherlands, Austria, Portugal, Slovenia, Slovakia and Finland. The Eurozone is
defined as including Cyprus, Estonia, Malta and Slovakia for the full period,
although Cyprus and Malta joined the Eurozone on 1 January 2008, Slovakia on 1
January 2009 and Estonia on 1 January 2011
EU 27 Tables by country