European governments allocate the largest share of their spending to social protection, while the second-largest category varies across countries. Euronews Business takes a closer look at how governments spend public money on services.
Citizens pay taxes, and tax revenues make up a significant share of public revenues across Europe. They are crucial for governments to fund public services such as education, healthcare and social protection.
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But where does public spending actually go across Europe? What do governments spend money on? And how is government spending allocated?
In 2024, tax revenues accounted for 40.3% of gross domestic product (GDP) in the EU, according to Eurostat. General government total expenditure exceeded this rate in the EU, reaching 49.6% of GDP in that year.
Two in five euros go to social protection
As government spending as a percentage of GDP varies significantly across European countries, looking at how total spending is distributed provides a clearer comparison.
For example, in the EU, 19.6% of GDP was spent on social protection, which accounts for 40% of total government spending. That means two in every five euros of general government spending in the EU go to social protection.
Social protection is designed to protect people against the risks associated with unemployment, parental responsibilities, sickness/health care and disability, the loss of a spouse or parent, old age, housing and social exclusion.
Pensions are the largest component of social protection benefits, making up almost half of the total. Social protection also covers sickness, disability and unemployment benefits.
Among 31 countries, including the EU, the UK, Norway, Switzerland and Iceland, social protection accounts for the largest share of government spending in every country, ranging from 26% in Hungary to 45.9% in Finland.
The share of social protection is above the EU average, meaning above 40%, in Luxembourg (42.5%), Italy (42.2%), Denmark (41.5%), France (41.5%), Austria (41.3%), Germany (41.3%), Spain (41%) and Portugal (40.4%).
The EU’s ‘Big Four’ economies are all above 40%, while the share is 34.5% in the UK. The UK figure is from the OECD.
A European Central Bank report prepared by Marta Rodríguez-Vives and Linda Kezbere underlines that there is no “one-size-fits-all optimal level of social spending” as a share of the economy.
“The set-up of pension systems varies significantly across euro area countries,” it says.
Rankings by spending share and actual amounts may differ
This wide gap between countries shows how governments prioritise their policies and spending. However, as GDP and total government expenditure in nominal terms vary widely, the share of spending and the actual amounts spent can look considerably different.
Therefore, looking at social protection spending per person, both in euros and in purchasing power terms, can provide a more meaningful country-level comparison.
Health is second-largest, but not in all countries
Health is the second-largest spending category in the EU on average, with a 15% share. This is also the case in the majority of countries, but other categories rank second in nine countries. They include Italy, Hungary, Romania, Bulgaria, Greece, Malta, Luxembourg, Latvia and Switzerland.
The share of health spending ranges from 6.7% in Switzerland and 10% in Hungary to 24.3% in Ireland.
The UK allocates a comparatively larger share of government spending to health, at 19%, than major EU economies such as France (15.6%) and Germany (15.4%).
The ECB report points out that differences in healthcare financing models affect government health spending as healthcare costs are shared between governments and households in different proportions.
Social protection and health account for more than half
The combined share of social protection and health exceeds 50% in two-thirds of countries, while together they account for 55% of government spending in the EU.
The EU’s ‘Big Four’ are all above the EU average, and all five Nordic countries also exceed 50%.
Hungary (36%) and Malta (39.5%) are outliers with shares below 40%, while Ireland and Finland exceed 59%.
The shares of three categories — general public services (12.4%), economic affairs (10.8%) and education (9.7%) — are close to each other at around 10% in the EU. However, there are significant differences across countries.
General public services cover the basic running of government, including government administration, parliament, public finances, foreign affairs, public debt and transfers between different levels of government.
Their share differs significantly across countries, from 7.5% in Bulgaria to 21.2% in Hungary.
General public services also account for the second-largest share of government spending in Hungary, Greece (17.1%) and Italy (15.4%) after social protection.
Economic affairs are the second-largest spending category in Malta, Latvia, Romania, Bulgaria and Luxembourg. The share ranges from 6.5% in Denmark to 20.3% in Malta.
It covers government spending on the economy, including jobs and business, agriculture, energy, industry, transport, communications and economic research.
Education: Switzerland has the highest spending share
Education has the second-highest share of government spending only in Switzerland, at 16.3%. Remarkably, the share of spending on education is below the EU average in all four of the EU’s largest economies, with Italy having the lowest at 8%.
These five categories make up between 80 and 92% of government spending across the countries, with the EU average at 87.9%.
Defence is the sixth-largest spending category in the EU at 3.5%. The UK allocates a comparatively higher share of government spending to defence at 4.9%, than some of the EU’s largest economies, such as France (3.2%) and Germany (2.7%).
Government spending on recreation, culture and religion, environmental protection, and housing and community amenities is very limited. Together, these three categories account for just 5.6% of total government spending in the EU.
