PARIS — European countries sharply reduced their deficits last year, official data showed Monday, even as their overall debt grew as governments pushed ahead with austerity measures in the face of the euro crisis.
The deficit of the 17 euro zone governments fell to 4.1 percent of gross domestic product in 2011 from 6.2 percent in 2010, Eurostat, the E.U. statistical agency, reported from Luxembourg.
The euro zone’s debt as a percentage of G.D.P. rose to 87.3 percent at the end of 2011 from 85.4 percent a year earlier.
For all 27 European Union nations, the deficit shrank to 4.4 percent in 2011 from 6.5 percent a year earlier, even as debt grew to 82.5 percent of G.D.P. from 80 percent.
The most dramatic decline occurred in Ireland, where the deficit shrank to 13.4 percent of G.D.P., from 30.9 percent in 2010.
That reflected the sharp expansion of the deficit in 2010, owing to the cost of bailing out the Irish financial sector.
Germany’s deficit slid to 0.8 percent of G.D.P. from 4.1 percent, as Chancellor Angela Merkel’s government benefited from the strongest growth of any major euro zone economy.
Greece, the ailing country where the crisis was touched off three years ago, saw its deficit decline to 9.4 percent of G.D.P. from 10.7 percent in 2010.
With the European and world economies flagging, Greece and other embattled nations face an uphill struggle in reducing their deficits to 3 percent or less of G.D.P. as stipulated under euro zone rules.
In all, Eurostat said, 17 E.U. nations had deficits above 3 percent. Among them were Britain, not a euro member, at 7.8 percent of G.D.P., France, at 5.2 percent, and Italy, at 3.9 percent.
In comparison, the United States had a debt-to-G.D.P. ratio last year of more than 100 percent, and a budget deficit of about 8.6 percent of G.D.P.
The debt burden of European countries grew partly because recession shrinks the denominator of the debt-G.D.P. equation.
That has led some economists argue that Europe would be better off focusing on growth.
But Jörg Krämer, chief economist at Commerzbank in Frankfurt, said, “The main reason why debt-to-G.D.P.
ratios in these countries continue to increase is that their deficits are still too high. The deficit is nothing more than the change in the level of your debt.”
In the case of Greece, he noted that even after accounting for the fact that the economy shrank sharply in 2011, the deficit came down only to 9.4 percent of G.D.P.
“That means you still have a deficit that is far in excess of the 3 percent or so that is considered sustainable,” he said.
Mr. Krämer said there was little prospect of Greece outgrowing its problems. “If you want to make its debt burden sustainable,” he said, “there will have to be some kind of debt forgiveness and restructuring.”
But deficit cutting, combined with structural reform, structural reforis still the only solution for the euro zone, he added.
nytimes.com
The deficit of the 17 euro zone governments fell to 4.1 percent of gross domestic product in 2011 from 6.2 percent in 2010, Eurostat, the E.U. statistical agency, reported from Luxembourg.
The euro zone’s debt as a percentage of G.D.P. rose to 87.3 percent at the end of 2011 from 85.4 percent a year earlier.
For all 27 European Union nations, the deficit shrank to 4.4 percent in 2011 from 6.5 percent a year earlier, even as debt grew to 82.5 percent of G.D.P. from 80 percent.
The most dramatic decline occurred in Ireland, where the deficit shrank to 13.4 percent of G.D.P., from 30.9 percent in 2010.
That reflected the sharp expansion of the deficit in 2010, owing to the cost of bailing out the Irish financial sector.
Germany’s deficit slid to 0.8 percent of G.D.P. from 4.1 percent, as Chancellor Angela Merkel’s government benefited from the strongest growth of any major euro zone economy.
Greece, the ailing country where the crisis was touched off three years ago, saw its deficit decline to 9.4 percent of G.D.P. from 10.7 percent in 2010.
With the European and world economies flagging, Greece and other embattled nations face an uphill struggle in reducing their deficits to 3 percent or less of G.D.P. as stipulated under euro zone rules.
In all, Eurostat said, 17 E.U. nations had deficits above 3 percent. Among them were Britain, not a euro member, at 7.8 percent of G.D.P., France, at 5.2 percent, and Italy, at 3.9 percent.
In comparison, the United States had a debt-to-G.D.P. ratio last year of more than 100 percent, and a budget deficit of about 8.6 percent of G.D.P.
The debt burden of European countries grew partly because recession shrinks the denominator of the debt-G.D.P. equation.
That has led some economists argue that Europe would be better off focusing on growth.
But Jörg Krämer, chief economist at Commerzbank in Frankfurt, said, “The main reason why debt-to-G.D.P.
ratios in these countries continue to increase is that their deficits are still too high. The deficit is nothing more than the change in the level of your debt.”
In the case of Greece, he noted that even after accounting for the fact that the economy shrank sharply in 2011, the deficit came down only to 9.4 percent of G.D.P.
“That means you still have a deficit that is far in excess of the 3 percent or so that is considered sustainable,” he said.
Mr. Krämer said there was little prospect of Greece outgrowing its problems. “If you want to make its debt burden sustainable,” he said, “there will have to be some kind of debt forgiveness and restructuring.”
But deficit cutting, combined with structural reform, structural reforis still the only solution for the euro zone, he added.
nytimes.com
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