According to the Eurostat figures released today, the public-sector debt ratio in the eurozone climbed by 1.6 percentage points (ppts) in the first three months of the year to 92.2%. In the final quarter 2012 the increase in the debt ratio had been 0.7ppts.
In 15 EMU countries the debt ratio rose on the preceding quarter, while only Germany (-0.7 ppts) and Estonia (-0.1 ppts) recorded a decline. The steepest increases were seen in Ireland (+7.7 ppts), Belgium (+4.7 ppts) and Spain (+4.0 ppts).
Topping the debt league (government debt as a proportion of economic output) are Greece (160.5%), Italy (130.3%), Portugal (127.2%) and Ireland (125.1%). In the first quarter of this year the debt ratio was below the Stability and Growth Pact threshold of 60% in only Estonia (10.0%), Finland (54.8%), Luxembourg (22.4%) and EMU accession candidate Latvia (39.1%).
Intergovernmental lending (stemming mainly from participation in the financial aid for Greece, Ireland and Portugal) amounted to 2.1% of eurozone GDP at the end of the first quarter 2013 and was thus little changed. More than 80% of the pledged EFSF aid to Greece, Ireland and Portugalhas already been dispensed.
In conjunction with the stabilization of the economy we expect to see in the course of the year, the ongoing budget consolidation is likely to improve the outlook for public-sector finances. At the same time fiscal policy is likely to be less restrictive this year than in 2012. For the eurozone as a whole the Commission is expecting an average (structural) consolidation of 0.75 ppts this year after 1.4 ppts last year. For one thing, the need to pass new austerity measures is gradually easing. Secondly, in the spirit of “growth-friendly consolidation”, five eurozone members – including the euro heavyweights France and Spain – have been granted more time to meet their nominal austerity targets.
All in all, we expect the eurozone debt ratio to peak this year at just under 96% before stabilizing next year and declining in 2015.