16th Oct 2021

Eurozone moves closer to balanced budgets, but debts increase

EU governments moved closer towards balancing their books in 2014, according to statistics released by Eurostat.

The average government deficit in the eurozone fell from 2.9 precent in 2013 to 2.4 percent in 2014, the EU’s statistical agency revealed on Tuesday (21 April),well within the bloc’s 3 percent limit in its stability and growth pact, and across the EU from 3.2 percent to 2.9 percent.

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In the euro area the average government debt to GDP ratio increased from 90.9 percent at the end of 2013 to 91.9 percent at the end of 2014, and in the EU28 from 85.5 percent to 86.8 percent.

Four governments - Denmark, Germany, Estonia and Luxembourg - recorded budget surpluses, while Cyprus and Spain recorded the highest deficits at 8.8 percent and 5.7 percent respectively. A total of twelve governments were beyond the 3 percent deficit limit.

Cash-strapped Greece achieved the biggest budget transformation last year, reducing its deficit from 12.3 percent in 2013 to 3.5 percent, raising hopes that it will be able to get within the 3 percent limit a year ahead of its 2016 deadline imposed by the European Commission.

However, at 177 percent of annual output, its debt burden is comfortably the largest across the bloc, nearly 50 percent higher than the debt piles of Italy and Portugal.

The figures indicate that governments’ statistic benefited again from the new European System of National and Regional Accounts, known as ESA 2010, which came into force last September.

ESA 2010 changed the way that investments in research and development and military spending are classified, treating them the same way as spending on infrastructure or machinery. Meanwhile, 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 revised its budget calculations between 2010 and 2013, and reduced the deficit and debt levels for a number of countries.

Eurozone finance ministers are set to discuss the bloc’s system of making annual recommendations to improve the functioning of each country’s economy, and the cohesion of the eurozone, at their meeting in Riga on Friday.

While the commission’s emphasis has tended to be on wage and labour market reform, particularly in high deficit countries, it is coming under increasing pressure to urge countries running surpluses to increase investment and stimulate demand.

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