EU debt grows as deficits decrease

Budget deficits in the EU fell, on average, in 2005 but overall public debt continues to rise, show new Brussels figures.

EU fiscal rules put a ceiling on government budget deficits of three per cent of GDP and the limit for total debt is set at 60 per cent.

In the eurozone, deficits in 2005 averaged at 2.4 per cent of GDP and ran at 2.3 per cent in the EU25.

Deficits had improved on 2004, reduced from 2.8 per cent in the eurozone and from 2.6 per cent in the EU25.

But overall government debt continues to rise, at 70.8 per cent in the eurozone and 63.4 per cent in the EU25.

Portugal, Greece and Italy ran the biggest budget deficits of the eurozone, in the EU25 Hungary, the UK and Germany were the worst offenders.

Hungary’s debt increased from 5.4 per cent to 6.1 per cent – a figure nearer 7.5 per cent if certain pensions schemes excluded by EU statisticians are counted.

The poor showing will be a major issue for Hungary’s newly re-elected government, which must submit an action programme to reduce debt by September 1.

Portugal’s deficit almost doubled over the 2004 to 2005 period, from 3.2 per cent to six per cent, following changes of government from centre-right to left.

Italy’s deficit, which rose to 4.1 per cent in 2005 from 3.4 per cent in 2004, will concentrate the mind of incoming leader, and former Brussels chief, Romano Prodi.

Germany, another country with a new government, saw deficits decrease 0.4 points from 2004 – but Berlin still breaches the rules at 3.3 per cent.

And, recent German forecasts of spiralling welfare costs may spell trouble ahead for Chancellor Angela Merkel.

France – in the red on EU rules since 2002 – scrapes in under three per cent at 2.9 per cent, after a row between Brussels and Paris over counting methods.

The EU’s Eurostat agency remains unhappy with Greek national accounting and is sending officials to Athens for a “methodological visit in the coming weeks in order to clarify the pending issues”.

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