Eurozone deficits improve, debt mounts as crisis fades

BRUSSELS — Eurozone public finances improved in 2013 as the economy finally turned the corner on a record recession but total debt levels remained dangerously high, official data showed on Wednesday.

The average eurozone government deficit — the shortfall between revenue and spending — came in at 3 per cent of output last year.

That was in line with the European Union (EU) ceiling and down from 3.7 per cent in 2012, the Eurostat statistics agency said.

The overall figures are broadly in line with growing signs that the worst of the eurozone debt crisis, which at one point threatened to destroy the euro, is over although several member countries will be applying budget rigour and deep economic reforms for years to come.

Public finances in bailed out Greece and Portugal sent signals of marked improvement on Wednesday, Spain signalled faster recovery, and France — seen as lagging on reforms — detailed new policies to put its economy in shape. 

Total accumulated debt increased to 92.6 per cent of the gross domestic product (GDP), up from 90.7 per cent, rising even further above the EU 60 per cent limit.

The continued increase in total debt levels reflects the high cost of the economic slump and debt crisis as governments borrowed heavily in an effort to stabilise their economies.

Christian Schulz at Berenberg Bank said the figures were positive overall, showing that the debt crisis austerity programmes were “paying off”.

Adjusted figures excluding the cost of bank recapitalisation efforts were even better, giving a 2.8 per cent deficit for last year, Schulz remarked in a note.

“With growth returning, increasing tax revenues and falling [spending] should drive the eurozone’s deficit even lower in coming years,” he argued. 

For the full 28-nation EU, the average public deficit was 3.3 per cent, down from 3.9 per cent, while total debt increased to 87.1 per cent of the GDP from 85.2 per cent, Eurostat pointed out in a report based on submissions by the EU member states. 

Germany best, 

France lags 

Powerhouse economy Germany once again put in the best performance, with its public finances in balance last year.

In marked contrast, France, struggling for growth and under pressure from Brussels to meet the 3 per cent target, stood out with a deficit of 4.3 per cent. 

France was supposed to have kept the 2013 deficit to 4.1 per cent but with the economy in difficulty, the EU in June agreed to give Paris two extra years, until 2015, to bring it back down to the EU ceiling. 

In Paris, the government announced Wednesday a new programme to get the deficit down to 3.8 per cent this year and 3 per cent in 2015 by cutting spending and boosting the economy.

French public spending, equal to 56.7 per cent of economic output this year, will fall to 53.5 per cent in 2017. 

Other EU countries coming in above the 3 per cent limit were led by Slovenia on 14.7 per cent. 

Twice-bailed out Greece had a deficit of 12.7 per cent, Ireland 7.2 per cent, Spain 7.1 per cent, non-euro Britain 5.8 per cent, Cyprus 5.4 per cent, with Croatia and Portugal on 4.9 per cent and Poland on 4.3 per cent.

The European Commission said separately that Athens had achieved a 2013 primary budget surplus — the balance before interest and stripping out bank support and other payments — equal to 0.8 per cent of the GDP.

This was a significant achievement, meeting a key target for its international creditors to  consider additional help.

The EU’s 3 and 60 per cent deficit and debt limits are regarded as prudent targets, the levels states should maintain so they are not overly vulnerable to crises and can manage the public finances in a sustainable fashion.

However, the majority of the 28 member states have breached those limits repeatedly, and for many years in some cases, and were forced to pay a heavy price by the debt crisis.

Wednesday’s figures showed Ireland with total debt of nearly 124 per cent of the GDP while Portugal, also bailed out with Dublin, was on 129 per cent.

Greece, only now returning to growth after six years in a recession which has shrank the economy by a quarter, is saddled with a staggering debt mountain equal to 175 per cent of GDP, Eurostat said.

Even Germany, held up as the model for all others, has total debt at 78.4 per cent, falling, while France is on 93.5 per cent and rising.

Britain, one of the fastest growing major economies, came in at 90.6 per cent for 2013.