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.
The 2011 Greek deficit number is 0.3 percentage points higher than estimated by Eurostat in April, mainly because of a downward revision of Greek economic growth, Eurostat said.
Spain, whose public finances are now in market focus, reduced its budget deficit only marginally to 9.4 per cent in 2011 from 9.7 per cent in 2010. The 2011 figure is 0.9 percentage points higher than previously reported.
“The increase in the deficit for 2011 is mainly due to the re-classification of capital injections by central government into Catalunya Caixa Bank, NCG Bank and Unnim Bank and to the previously unrecorded unpaid bills in the state and local government sub-sectors,” Eurostat said.
But Spain’s debt was still relatively low, at 69.3 per cent of GDP against 61.5 per cent in 2010.
Italy, also under market scrutiny cut its budget shortfall to 3.9 per cent from 4.5 per cent in 2010. Its debt inched higher to 120.7 per cent from 119.2 per cent.
Portugal, already on a euro zone financial lifeline after being cut off from market borrowing, more than halved its budget deficit last year to 4.4 per cent of GDP from 9.8 per cent as a result of reforms, but its debt jumped to 108.1 per cent from 93.5 per cent.