Eurozone debts still exceeding pre-crisis level

In the wake of the credit crunch, European governments saw their debt levels rise. The highest debt levels across the euro area were reached in 2014. The debt ratio peaked at 92.8 percent of GDP that year, followed by a steady decline. In the Netherlands, the debt-to-GDP ratio has declined again since then, to well below the European ceiling of 60 percent of GDP. In most other eurozone countries, however, it is still exceeding this ceiling. Even more than ten years after the onset of the credit crunch, several eurozone countries are still running budget deficits. As a result, debt reduction is slower in these countries or not taking place at all. At 180.2 percent of GDP, Greece currently has the highest debt-to-GDP ratio in the eurozone. In countries such as Belgium and Spain, the debt ratio remained at a high level. In Italy and France, the ratio was still rising in 2019.

Government debt of EU countries outside of the eurozone is on average lower than within the eurozone. This is mainly due to the low debt levels of the Scandinavian and Eastern European countries which have retained their own currencies and the high debt levels of the Southern European countries, which do form part of the eurozone.

¹⁾ Choose a year: 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019*

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Source: CBS, Eurostat
*Q2 2019

Government debt in eurozone exceeding 10,000 billion euros

In mid-year 2019, the countries in the eurozone reached a combined public debt of 10,035 billion euros, or 86.4 percent of GDP. In order to comply with the European debt ceiling at the current GDP levels, total debt would need to be almost 3,100 billion euros lower.

At present, Italy and France each have a public debt level of around 2,400 billion euros, approximately 23 percent of the total public debt in the eurozone. Greece’s sovereign debt amounts to 336 billion euros, i.e. 3 percent of the total debt. At 404 billion euros, the Netherlands’ debt accounts for nearly 4 percent.

Dutch budgetary discipline helps reduce debt-to-GDP ratio

In the Netherlands, the debt ratio saw its sharpest increase in 2008, although GDP growth and the positive government balance had a downward effect on the ratio amounting to 2.7 percentage points of GDP that year. However, the credit crunch forced the Dutch government to intervene in order to maintain the stability of the financial markets. In a span of six months, temporary funds were provided to financial institutions and Fortis Nederland was nationalised. These interventions had an upward effect on the debt ratio of 14.4 percentage points of GDP, which caused the ratio to go up by 11.7 percentage points of GDP in 2008.

In 2009, the Netherlands fell into recession. The lower GDP that year resulted in a higher debt-to-GDP ratio due to the so-called denominator effect. Although – after adjustment for price changes – GDP decreased as well in 2012, this was offset by a GDP increase at current prices that year. The year 2009 was therefore the only year in which GDP reduced the debt ratio. In 2009, the budget surplus changed into a budget deficit, which had an upward effect on the debt ratio up to and including 2015. The debt ratio has been declining again since; the positive government balance as of 2016, stronger GDP growth and the sale of various assets, including partial stock market flotation of ABN AMRO shares in 2015, contributed to this reduction.

Government balance in eurozone still affecting debt-to-GDP ratio

The evolution of the debt-to-GDP ratio in the eurozone is broken down in a different way compared to the one in the Netherlands. In the eurozone as well, GDP had an upward effect on the ratio only in the year 2009. Because in many countries public expenditure exceeded public income in each year during the period 2007-2019, government balances had an upward effect on the ratio. In addition, the ratio in the eurozone rose between 2007 and 2010 due to purchases and sales and revaluation of financial assets, amongst others.