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BackThis week, the European Central Statistics Office Eurostat presented the latest data concerning public sector debt and deficit. The figures once again showed the enormous impact the rescue of the financial sector and the recession, which is unprecedented since the existence of the European Union, had on the public sector: within only 4 years (2008 – 2011), the level of debt in the European Union rose by more than € 2.6 billion resp. by 20 percentage points from 62.5 to 82.5 % of the Gross Domestic Product. Hence it looks as if the austerity measures, which were implemented in almost all Member States, have not only failed, but that they even appear to have had a counterproductive effect on the economy and the level of debt.
In particular Member States, which for several years have been implementing more or less voluntary rigorous austerity measures in the public sector budget, have not succeeded in significantly reducing their level of debt. Instead, the Gross Domestic Product is falling and in many cases unemployment has seen a sharp increase. Example Great Britain: in spite of Prime Minister David Cameron insisting on strict and deep cuts, Britain has not succeeded in reducing her annual budget deficit. In 2009, the United Kingdom had a deficit of 11.5 %; in 2010 it stood at 10.2 % and was still at 8.3 % in 2011. According to this, the budget deficits of the last two years are almost exactly on the same level as that of Greece. And this in spite an excellent rating by credit rating agencies and correspondingly low interest payments for her debt. Within four years, Great Britain’s level of debt has soared by almost 31 % to 85.7 %. Meanwhile, the level of unemployment rose from 5.3 % in 2007 to 8.3 % by February 2012. In 2011, the Gross Domestic Product only increased by 0.7 % and the forecast is even worse for this year.
A slightly better known example is Ireland, who over the past four years, triggered by the burst property bubble, had to deal with significant bailouts of the Irish banks. Following a budget deficit - unprecedented in the history of the EU - of 31.2 % in 2010, which was caused by massive subventions for the banking sector, at 13.1 %, the level of the deficit remains almost at the same level as 2009. And this in spite of having made significant efforts to cut spending for some years. What has seen a considerable reduction is the Gross Domestic Product, which fell from almost € 180 billion in 2008 to € 156 billion at the end of last year. Little public attention has been given to the worrying development of the Irish labour market: if in 2007, the level of unemployment stood at about 4.6 %, Ireland is now faced with an increase of 10 % to almost 14.7 % as at February 2012. The situation for young people is catastrophic: in February 2012, 31.6 % of the under-25s were without a job.
In contrast, Germany’s situation is far better, a fact, which many regard as Germany being the beneficiary of the crisis. If in 2010, the budget deficit still stood at 4.3 %, it was just 1 % in 2011. Only Finland at -0.5 % and Luxembourg at -0.6 % achieved better values within the Eurozone. However, in respect of her overall debt, Germany has a surprisingly high level of 81.2 %, thereby missing the limit of a maximum 60 % of her own GDP of the existing public debt required by the Maastricht Treaty for the tenth consecutive year. Only 6 Eurozone countries have an even worse level of debt than Germany.
The Scandinavian States are performing traditionally well: last year, Sweden achieved a budget surplus of 0.3 %; her level of debt is at 38.4 %. Denmark and Finland have a low debt quota of 46.5 % and 48.5 % respectively. In respect of deficit and debt quota at 2.6 % and 72.2 %, Austria is better placed than the EU27 average (4.5 % und 82.5 %).
Whether the latest efforts to cut spending, which have been made by almost all EU countries, will result in a booming economy, falling unemployment rates and lower levels of debt is doubtful in view of the experiences made by the EU countries that have had their austerity measures in place for some years. One can only be certain in a year’s time when the figures for 2012 are available.
A slightly better known example is Ireland, who over the past four years, triggered by the burst property bubble, had to deal with significant bailouts of the Irish banks. Following a budget deficit - unprecedented in the history of the EU - of 31.2 % in 2010, which was caused by massive subventions for the banking sector, at 13.1 %, the level of the deficit remains almost at the same level as 2009. And this in spite of having made significant efforts to cut spending for some years. What has seen a considerable reduction is the Gross Domestic Product, which fell from almost € 180 billion in 2008 to € 156 billion at the end of last year. Little public attention has been given to the worrying development of the Irish labour market: if in 2007, the level of unemployment stood at about 4.6 %, Ireland is now faced with an increase of 10 % to almost 14.7 % as at February 2012. The situation for young people is catastrophic: in February 2012, 31.6 % of the under-25s were without a job.
In contrast, Germany’s situation is far better, a fact, which many regard as Germany being the beneficiary of the crisis. If in 2010, the budget deficit still stood at 4.3 %, it was just 1 % in 2011. Only Finland at -0.5 % and Luxembourg at -0.6 % achieved better values within the Eurozone. However, in respect of her overall debt, Germany has a surprisingly high level of 81.2 %, thereby missing the limit of a maximum 60 % of her own GDP of the existing public debt required by the Maastricht Treaty for the tenth consecutive year. Only 6 Eurozone countries have an even worse level of debt than Germany.
The Scandinavian States are performing traditionally well: last year, Sweden achieved a budget surplus of 0.3 %; her level of debt is at 38.4 %. Denmark and Finland have a low debt quota of 46.5 % and 48.5 % respectively. In respect of deficit and debt quota at 2.6 % and 72.2 %, Austria is better placed than the EU27 average (4.5 % und 82.5 %).
Whether the latest efforts to cut spending, which have been made by almost all EU countries, will result in a booming economy, falling unemployment rates and lower levels of debt is doubtful in view of the experiences made by the EU countries that have had their austerity measures in place for some years. One can only be certain in a year’s time when the figures for 2012 are available.