Tuesday

13th Apr 2021

New accounting rules save EU deficit

  • The EU's average deficit fell below 3 percent in 2013, thanks to new accounting methods (Photo: Jorge Franganillo)

Budget deficits in the EU were within the limits set out in the bloc's stability pact in 2013 thanks to changes to accounting rules, the bloc's statistical agency Eurostat revealed on Tuesday (21 October).

Eurostat found that the average deficit across the the 18 eurozone countries was 2.9 percent last year, slightly below the 3.1 percent figure previously reported, and within the 3 percent limit set out in the EU's stability and growth pact.

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It is the first time that the average rate has been under the 3 percent limit since the start of the financial crisis began in 2008.

The new calculations are based on the new European System of National and Regional Accounts, known as ESA 2010. Agreed by MEPs and ministers in 2012, the system updates the EU's 15-year old rules on accounting, but only came into force this month.

ESA 2010's main provisions mean that investments in research and development and military spending are classified as assets in the same way as spending on infrastructure or machinery, while large chunks of the so-called grey economy and illegal activities such as prostitution and drug trafficking are also included in the calculations.

The changes resulted in a 2.5 percent boost for the EU economy when Eurostat, which is based in Luxembourg, released figures last week revising its calculations between 2010 and 2013.

But the new rules did not prevent the average debt burden of eurozone countries from going up from 89 percent to 90.9 percent in 2013 and to 85 percent across the entire EU, well above the bloc's 60 percent threshold. However, this is still lower than the 92.7 percent reported using the old methodology.

Luxembourg and Germany were the only countries to achieve a balanced budget in 2013. At the other end of the scale, Slovenia and Greece recorded deficits of over 14 percent and 12 percent respectively, with bank recapitalisation accounting for around 10 percent of the deficit in both countries.

Greece also has, at 174.5 percent of total output, the highest debt burden in the EU, followed by Portugal and Italy.

The main beneficiaries from the new calculations were Ireland, which saw its 2013 deficit slashed from 7.2 percent to 5.7 percent, and Cyprus, whose debt burden was reduced by 9.5 percent.

At a briefing with reporters on Tuesday, Eduardo Robredo, a European Commission official, told reporters that the changes to the statistics had not caused any countries to go above or fall below the 60 percent and 3 percent thresholds, although he praised governments for having made "a very big effort" to cut deficits.

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