Monday

27th Feb 2017

European finances still in bad shape, statistics show

  • EU governments accumulated more debt in 2011 than 2010 (Photo: Jorge Franganillo)

EU countries in 2011 managed to reduce their deficits, but they accumulated more debt compared to the previous year, the bloc's statistics office said Monday (23 April).

Overall government deficit in the EU stood at 4.5 percent of the gross domestic product, down from 6.5 percent in 2010, while in the eurozone the drop was from 6.2 to 4.1 percent in 2011.

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The worst figures continued to be registered in Ireland (13.1%) and Greece (9.1%), two bailed-out countries, followed by Spain (8.5%), the UK (8.3%) and Slovenia (6.4%), well above the three-percent deficit threshold set out under EU rules. At the other end of the spectrum, Germany's deficit shrank to one percent of GDP in 2011, while Estonia and Sweden recorded a surplus.

Hungary also has a surplus (4.3%). But the EU commission deemed that the surplus was not due to a sustainable budget policy as it resulted from the nationalisation of a pension fund. Budapest is the first country to face sanctions under the strengthened economic surveillance rules if it does not pass "sustainable" budget cuts.

A total of 23 out of the EU's 27 states are under so-called excessive deficit procedure, including big countries like France, Spain, Italy and Germany. Only Estonia, Finland, Luxembourg and Sweden have their public finances in order.

The EU commission in May will publish its spring economic forecasts followed by recommendations for each country for their plans to bring down their deficit to three percent.

Spain and the Netherlands have already run into trouble with this target. Madrid is struggling with an 8.5 percent deficit for 2011, which which has to be cut back to three percent by next year. The Dutch government resigned on Monday after it failed to cobble together a parliamentary majority for austerity measures needed to reach the three-percent threshold next year.

Meanwhile, government debt - which should not exceed 60 percent of GDP - rose in the euro area from 85.3 percent in 2010 to 87.2 percent in 2011. In the wider EU at 27, the same trend was registered: 82.5 percent debt compared to 80 percent a year before.

Eastern European states had the lowest debt rates - Estonia (6%), Bulgaria (16.3%), Romania (33.3%), Lithuania (38.5), the Czech Republic (41.2%) and Latvia (42.6%) - as well as Luxembourg, Sweden and Denmark.

But 14 EU states had debt ratios higher than 60 percent of GDP in 2011: Greece (165.3%), Italy (120.1%), Ireland (108.2%), Portugal (107.8%), Belgium (98.0%), France (85.8%), the United Kingdom (85.7%), Germany (81.2%), Hungary (80.6%), Austria (72.2%), Malta (72%), Cyprus (71.6%), Spain (68.5%) and the Netherlands (65.2%).

In addition, other statistics published on Monday showed that the eurozone's private sector in April contracted at the sharpest pace since November, suggesting that recession will not end as soon as predicted.

A preliminary managers' index on manufacturing (PMI) slipped to 46 from March's 47.7 while the services PMI also declined to 47.9 from 49.2 over the same period, data from the statistical database firm showed. A level below 50 signals recession.

National data from Italy and France also show consumer confidence and business sentiment slumping, while Germany's data are on the rise, aggravating the divide between the EU powerhouse and the rest of the euro economies.

EU to freeze millions for Hungary over deficit

Hungary on Wednesday was given less than a year to lower its public deficit or have a third of its EU subsidies slashed, amounting to €495 million. It is the first time the EU commission takes such an action.

Greece and creditors break bailout deadlock

Athens agreed on budget cuts worth up to €3.6 billion and extracted some concessions from creditors, but the IMF warned the package might not be enough.

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