Bloomberg News

Euro-Area Debt Increased to Record 90% of GDP in 2nd Quarter

October 24, 2012

The euro area’s debt burden rose to a record in the second quarter as governments across the currency bloc struggled to contain the fiscal crisis.

Government debt as a percentage of gross domestic product rose to 90 percent from 88.2 percent in the first quarter, the European Union’s statistics office in Luxembourg said today. That’s the highest since the euro was introduced in 1999 and above the EU limit of 60 percent of GDP.

The euro has gained about 3.4 percent against the dollar over the past two months after European officials stepped up their crisis response and the European Central Bank unveiled a program to purchase sovereign debt. Still, governments may struggle to plug their budget deficits and lower the debt burden as the region’s economic slump shows signs of deepening. Euro- area manufacturing and service industries contracted this month and German business confidence fell, reports showed today.

Twenty EU member states reported an increase in their debt- to-GDP ratio from the first quarter, while six had a decrease and one country’s debt remained stable, today’s data showed. Greece, which sparked the fiscal crisis, had the highest debt burden at 150.3 percent of GDP at the end of June, up from 136.9 percent, followed by Italy at 126.1 percent and Portugal at 117.5 percent. Ireland, which also received aid, reported a debt level of 111.5 percent, up from 108.5 percent at the end of the first quarter.

In Germany, Europe’s largest economy, the debt burden rose to 82.8 percent of GDP from 81.1 percent. Estonia had the lowest level in the 27-nation EU at 7.3 percent.

Loans accounted for 18.6 percent of euro-area government debt at the end of the second quarter, while currency and deposits made up 2.8 percent. Securities other than shares made up the largest part, or 78.6 percent.

To contact the reporter on this story: Simone Meier in Zurich at smeier@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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