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Eurozone deficits improve but debt mounts


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Eurozone deficits improve but debt mounts

Eurozone government are finally starting to get their finances under control, according to the Eurostat statistics agency.

But the region’s total debt levels remained dangerously high.

The latest figures show the average eurozone government deficit – that is the shortfall between revenue and spending – was three percent of GDP last year.

Some countries are way above that. Slovenia had the worst deficit at 14.7 perfent, Greece is a couple of percentage point below that at 12.7, while Ireland and Spain were at 7.2 and 7.1 percent respectively.

On the debt front Greece is the standout. The country – which has had to be bailed out twice – is only now returning to growth after six years in recession. During that time the economy has shrunk by a quarter.

Mainly as a result of borrowing from the eurozone, Greece’s debt mountain went up from 157 percent of GDP in 2012 to a staggering 175.1 percent of GDP last year.

Second on the Eurostat list of the currency bloc’s biggest debtors is Italy at 132.6 percent of GDP, Portugal (129 percent) and Ireland (123.7 percent) are third and fourth.

Italy, the eurozone’s third-largest economy, is struggling to cut its debt in the face of record unemployment and weak growth.

There is the same problem for France, Europe’s second-biggest economy, which on Wednesday unveiled additional spending cuts, under pressure from Brussels to meet its commitments under EU deficit rules.

In documents delivered to the parliamentary finance committee, the government raised its official forecasts for the deficit for this year and next by 0.2 points to 3.8 percent and 3.0 percent of GDP respectively.

That leaves no margin for error should growth fail to meet government projections – as most private economists expect.

A 50 billion euro savings package – that will freeze pensions and welfare benefits for a year, keep most civil service pay unchanged until 2017 and clamp down on public spending – now has to be approved by the European Commission, which polices member states’ public finances.

The EU executive is likely to decide on June 2, after next month’s European Parliament elections, whether to extend an excessive deficit disciplinary procedure against France which began in 2009. An EU source said sanctions could not be ruled out but the final decision would be political.

In 2013, France missed its target of 4.1 percent and its deficit ended the year at 4.3 percent of GDP.

with Reuters and AFP

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