Europe’s Debt Surged to Record Last Year, Led by Greece: Economy

Europe’s Debt Surged to Record Last Year, Led by Greece: Economy

The euro region’s combined debt burden surged last year to the highest since the start of the single currency as governments struggled to fill budget gaps and contain the fiscal crisis.
The debt of the 17 nations using the euro climbed to 87.3 percent of gross domestic product in 2011 from 85.4 percent the previous year, the European Union’s statistics office in Luxembourg said today. That’s the highest since the euro was introduced in 1999. Greece topped the list with debt at 170.6 percent of GDP, followed by Italy and Portugal at 120.7 percent and 108.1 percent. The EU’s debt-to-GDP limit is 60 percent.
European governments are seeking ways to plug their deficits and restore investor confidence as the economy shows signs of a deepening economic slump. Greek Prime Minister Antonis Samaras’s government has been negotiating with the euro area and the International Monetary Fund over 13.5 billion euros ($17.6 billion) of austerity measures for 2013 and 2014 needed to qualify for the release of more loan installments.
Peripheral nations’ austerity push “may drive these countries into a deep recession and it may cause structural damage,” Richard Barwell, an economist at Royal Bank of Scotland Group Plc, said in a research note. “But it will bring forward the point at which the debtor is fundamentally sound -- running a sizeable structural surplus, reaping the returns of reforms that should boost growth.”
The euro strengthened 0.3 percent against the dollar today and was at $1.3068 as of 11:45 a.m. in London.
Austerity Measures
Fourteen of the 27 EU member states exceeded the bloc’s debt limit last year, according to today’s report. Germany’s debt burden was at 80.5 percent of GDP, down from 82.5 percent in 2010. In Greece, Ireland and Portugal, which all have received government bailouts, debt increased from the previous year. Spain’s debt rose to 69.3 percent from 61.5 percent.
The euro area’s total budget deficit narrowed to 4.1 percent of GDP last year from 6.2 percent in 2010 as nations toughened austerity measures to contain the sovereign-debt crisis. Seventeen EU member states had deficits exceeding the limit of 3 percent of GDP, with Ireland’s budget gap at 13.4 percent, followed by Greece and Spain at 9.4 percent of GDP.
The statistics office previously reported that euro-zone government debt had reached 87.2 percent of GDP in 2011.