Euro zone fiscal deficit cut in 2011, but debt climbs

The euro zone’s fiscal deficit fell sharply last year as governments slashed expenses and raised taxes to regain market confidence in their public finances, but public debt still climbed, data from the European Union’s statistics office showed on Monday.

Eurostat said the aggregate budget deficit in the 17 countries using the euro fell to 4.1 per cent of gross domestic product in 2011 from 6.2 per cent in 2010 – the first year of the sovereign debt crisis.

Euro zone public debt, however, rose to 87.3 per cent of GDP in 2011 from 85.4 per cent, Eurostat said.

The euro zone’s biggest economy, Germany, slashed its budget deficit to 0.8 per cent in 2011 from 4.1 per cent in 2010 and its debt fell to 80.5 per cent of GDP from 82.5 per cent.

Ireland reported a spectacular drop in the deficit to 13.4 per cent from 30.9 per cent as the one-off expense of shoring up its banking sector disappeared from its books. But its debt jumped to 106.4 per cent from 92.2 per cent.

Greece, where the crisis started, had the highest debt in Europe last year, reaching 170.6 per cent of GDP even though it reduced its deficit to 9.4 per cent from 10.7 per cent in 2010 and 15.6 per cent in 2009.

Note EU-Digest: the figures are somewhat nebulous when it comes to giving a precise picture on the US debt but several reports indicate it is now over 100%. GDP growth has also slowed and deficit spending has increased. 

Today, the US is also running its fourth $1+trillion deficit. US deficit to GDP ratio is nearly 10%. and the “official” Total Debt to GDP is well over 100% though when you include the debt hidden in various Government entities and unfunded liabilities the US could be well over a Debt to GDP ratio of 300% at this point.

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