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News : EU Economy Last Updated: Apr 27, 2011 - 5:24 AM


EU Deficits/Debt 2010: Ireland at -32.4% of GDP; Greece at -10.5%; UK at -10-4%; Sweden at zero
By Finfacts Team
Apr 26, 2011 - 1:04 PM

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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% to 80.0%.

Ireland's huge deficit included bailout costs related to Anglo Irish Bank and Irish Nationwide Building Society.

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%), Slovakia (-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%), Ireland (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%) and Spain (60.1%).

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 almost unchanged.

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 further."

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

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