Provision of deficit and debt data for 2009 - first notification Euro area and EU27 government deficit at 6.3% and 6.8% of GDP respectively Government debt at 78.7% and 73.6%

STAT/10/55

22 April 2010

Provision of deficit and debt data for 2009 - first notification

Euro area and EU27 government deficit at 6.3% and 6.8% of GDP respectively

Government debt at 78.7% and 73.6%

In 2009, the government deficit1 and government debt1 of both the euro area2 (EA16) and the EU27 increased compared with 2008, while GDP fell. In the euro area the government deficit to GDP ratio increased from 2.0% in 20083 to 6.3% in 2009, and in the EU27 from 2.3% to 6.8%. In the euro area the government debt to GDP ratio increased from 69.4% at the end of 2008 to 78.7% at the end of 2009, and in the EU27 from 61.6% to 73.6%.

In 2009 the largest government deficits in percentage of GDP were recorded by Ireland (-14.3%), Greece (‑13.6%) the United Kingdom (-11.5%), Spain (-11.2%), Portugal (-9.4%), Latvia (-9.0%), Lithuania (-8.9%), Romania (‑8.3%), France (-7.5%) and Poland (-7.1%). No Member State registered a government surplus in 2009. The lowest deficits were recorded by Sweden (-0.5%), Luxembourg (-0.7%) and Estonia (-1.7%). In all, 25 Member States recorded a worsening in their government balance relative to GDP in 2009 compared with 2008, and two (Estonia and Malta) an improvement.

At the end of 2009, the lowest ratios of government debt to GDP were recorded in Estonia (7.2%), Luxembourg (14.5%), Bulgaria (14.8%), Romania (23.7%), Lithuania (29.3%) and the Czech Republic (35.4%). Twelve Member States had government debt ratios higher than 60% of GDP in 2009: Italy (115.8%), Greece (115.1%), Belgium (96.7%), Hungary (78.3%), France (77.6%), Portugal (76.8%), Germany (73.2%), Malta (69.1%), the United Kingdom (68.1%), Austria (66.5%), Ireland (64.0%) and the Netherlands (60.9%).

In 2009, government expenditure4 in the euro area was equivalent to 50.7% of GDP and government revenue4 to 44.4%. The figures for the EU27 were 50.7% and 44.0% respectively. In both zones, the government expenditure ratio increased between 2008 and 2009, while the government revenue ratio decreased.

Reservations on reported data5

Greece: Eurostat is expressing a reservation on the quality of the data reported by Greece, due to uncertainties on the surplus of social security funds for 2009, on the classification of some public entities and on the recording of off-market swaps. Following completion of the investigations that Eurostat is undertaking on these issues in cooperation with the Greek Statistical Authorities, this could lead to a revision for the year 2009 of the order of 0.3 to 0.5 percentage points of GDP for the deficit and 5 to 7 percentage points of GDP for the debt.

Amendment by Eurostat to reported data6

United Kingdom: Eurostat has amended the deficit data notified by the United Kingdom for the years 2006 to 2009 for consistency of recording of UMTS licences proceeds in 2000. This leads to an increase in the government deficit in 2007 and 2008 (as well as for financial year 2005/2006, 2007/2008 and 2008/2009) by 1044 mn GBP (0.1% of GDP) and in 2006 and 2009 (financial year 2006/2007) by 1045 mn GBP (0.1% of GDP). There is no change in the reported debt figures.

Other issues

Publication of supplementary tables for the financial crisis:

Eurostat publishes in Annex 2, as in the October 2009 EDP News Release, supplementary tables for the financial crisis for the euro area and the EU27. These tables contain data on the "net revenue/cost for general government (impact on ESA95 government deficit)" and "outstanding amounts of assets, actual liabilities and contingent liabilities of government" in relation to government interventions in the context of the financial turmoil for the years 2007 to 2009. Eurostat also publishes, on its web site

(http://epp.eurostat.ec.europa.eu/portal/page/portal/government_finance_statistics/excessive_deficit/supplementary_tables_financial_turmoil), a summary table and tables for individual Member States. See also the Eurostat decision on the statistical recording of public interventions to support financial institutions and financial markets during the financial crisis (Eurostat News Release 103/2009 of 15 July 2009).

Background

In this News Release, Eurostat, the statistical office of the European Union, is providing7 government deficit and debt data based on figures reported in the first 2010 notification by EU Member States for the years 2006-2009, for the application of the excessive deficit procedure (EDP). This notification is based on the ESA95 system of national accounts. This News Release also includes data on government expenditure and revenue and an annex with the main revisions since the October 2009 News Release.

Eurostat will also be releasing information on the underlying government sector accounts, as well as on the contribution of deficit/surplus and other relevant factors to the variation in the debt level (stock-flow adjustment), on the government finance statistics section on its website:

http://epp.eurostat.ec.europa.eu/portal/page/portal/government_finance_statistics/introduction

• According to the Protocol on the excessive deficit procedure annexed to the EC Treaty, government deficit (surplus) means the net borrowing (net lending) of the whole general government sector (central government, state government, local government and social security funds). It is calculated according to national accounts concepts (European System of Accounts, ESA95). Government debt is the consolidated gross debt of the whole general government sector outstanding at the end of the year (at nominal value).

• Table of euro area and EU27 aggregates: the data are in euro. For those countries not belonging to the euro area, the rate of conversion into euro is as follows:

- for deficit / surplus and GDP data, the annual average exchange rate;

- for the stock of government debt, the end of year exchange rate.

• Table of national data: these are in national currencies. For Cyprus, Malta, Slovenia and Slovakia, data for the years prior to the adoption of the euro have been converted into euro according to the irrevocable conversion rate.

• Euro area (EA16): Belgium, Germany, Greece, Spain, France, Ireland, Italy, Cyprus, Luxembourg, Malta, Netherlands, Austria, Portugal, Slovenia, Slovakia and Finland. In the attached table, the euro area is defined as including Cyprus, Malta, Slovenia and Slovakia for the full period, although Slovenia joined the euro area on 1 January 2007, Cyprus and Malta on 1 January 2008 and Slovakia on 1 January 2009.

• In the previous provision of data for the excessive deficit procedure, the 2008 government deficits for the EA16 and the EU27 were 2.0% and 2.3% of GDP respectively. The government debt of the EA16 was 69.3% of GDP and of the EU27 61.5% of GDP. See News Release 149/2009 of 22 October 2009.

• Government expenditure and revenue are reported to Eurostat under the ESA95 transmission programme. They are the sum of non-financial transactions by general government, and include both current and capital transactions. For definitions, see Council Regulation No. 2223/96, as amended. It should be noted that the government balance (i.e. the difference between total government revenue and expenditure) is not exactly the same under ESA95 as that for the purpose of the excessive deficit procedure. Regulation (EC) No 2558/2001 on the reclassification of settlements under swaps agreements and forward rate agreements implies that there are two relevant definitions of government deficit/surplus:

• The ESA95 definition of net lending /net borrowing does not include streams of payments and receipts resulting from swap agreements and forward rate agreements, as these are recorded as financial transactions;

• For the purpose of the excessive deficit procedure, streams of payments and receipts resulting from swaps and forward rate agreements are recorded as interest expenditure and contribute to the net lending/net borrowing of general government.

Concerning 2009, for most Member States, the difference, if any, between the two balances is minor except in Sweden (0.27% of GDP), Finland (0.25% of GDP), Denmark (0.11% of GDP), Latvia (0.10% of GDP) and Greece (-0.10% of GDP). These differences improve net lending/net borrowing for EDP purposes for all the mentioned countries except Greece.

• The term “reservations” is defined in article 15 (1) of Council Regulation 479/2009. The Commission (Eurostat) expresses reservations when it has doubts on the quality of the reported data.

• According to Article 15 (2) of Council Regulation 479/2009, the Commission (Eurostat) may amend actual data reported by Member States and provide the amended data and a justification of the amendment where there is evidence that actual data reported by Member States do not comply with the quality requirements (compliance with accounting rules, completeness, reliability, timeliness and consistency of statistical data).

• According to Article 14 (1) of Council Regulation 479/2009, Eurostat provides the actual government deficit and debt data for the application of the Protocol on the excessive deficit procedure, within three weeks after the reporting deadlines. This provision of data shall be effected through publication.

For further information on the methodology of statistics reported under the excessive deficit procedure, please see Council Regulation 479/2009 (available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:145:0001:0009:EN:PDF), Council Regulation 2223/96, as amended (consolidated version available at http://eur-lex.europa.eu/LexUriServ/site/en/consleg/1996/R/01996R2223-20030807-en.pdf) and the Eurostat publication "ESA95 manual on government deficit and debt", second edition (2002), 240 pages, ISBN 92-894-3231-4, pdf file free of charge, paper copy 37 euro (excluding VAT). Additions to this manual on securitisation, capital injections, classification of funded pension schemes, lump sum payments to government in the context of the transfer of pension obligations, and long term contracts between government units and non-government partners are available in the government finance statistics section on the Eurostat website.

Issued by:

Eurostat Press Office

Tim ALLEN

Tel: +352-4301-33 444

eurostat-pressoffice@ec.europa.eu

Eurostat news releases on the Internet:

http://ec.europa.eu/eurostat

Selected Principal European Economic Indicators:

http://ec.europa.eu/eurostat/euroindicators

GDP, government deficit/surplus and debt in the EU (in national currencies)

GDP, government deficit/surplus and debt in the EU (in national currencies)

GDP, government deficit/surplus and debt in the EU (in national currencies)

GDP, government deficit/surplus and debt in the EU (in national currencies)

* Data refer to calendar years. Data referring to the financial year (1 April to 31 March), are shown in italics. For the United Kingdom, the relevant data for implementation of the excessive deficit procedure are financial year data.

Annex 1

Main revisions between the October 2009 and the April 2010 notifications

Below are shown country specific explanations for the largest revisions in deficit and debt for 2006-2008 between the October 2009 and April 2010 notifications, as well as in GDP.

Deficit

Czech Republic: The increase in the deficit for 2008 is due to updated data on final settlements of income taxes.

Denmark: The increase in the surplus for 2007 is mainly due to the reclassification of transactions from financial to non-financial and to updated source data relating to income taxes.

Estonia: The increase in the surplus for 2006 is due to a change in the time of recording of sugar stock fines from producers to government.

Ireland: The increase in the deficit for 2008 is due to updated source data on central government level.

Greece : The increase in the deficit for 2006 and 2007 is due to updated source data relating mainly to the working balance of central government and the social security funds, methodological changes relating to the time of recording of lump sums received by the social security subsector and previously unrecorded liabilities of hospitals.

Luxembourg: The increase in the surplus for 2008 is mainly due to updated source data relating to government investment.

Malta: The decrease in the deficit for 2008 is due to updated source data in relation to extra budgetary units.

Finland: The decrease in the surplus for 2008 is mainly due to updated source data for local government.

Debt

Denmark: The increase in the debt for 2006 to 2008 is mainly due to methodological changes in the recording of loans.

Greece: The increase in the debt for 2006 is due to updated source data relating to a short term credit facility undertaken at the end of the year.

United Kingdom: The increase in the debt for 2006 and 2007 is mainly due to the reclassification of London and Continental Railways to the general government sector.

GDP

The GDP for 2008 notified in April 2010 for EDP purposes was revised by a number of Member States compared to that notified in October 2009 by small amounts, except for Romania (2.1% upwards). Changes in GDP affect deficit and debt ratios due to the denominator effect.

Revisions in government deficit/surplus and government debt ratios

from the October 2009 to the April 2010 notification

* Revisions to deficit/surplus ratios: a positive sign means an improved government balance relative to GDP, and a negative sign a worsening.

Revisions in government deficit/surplus and government debt ratios

from the October 2009 to the April 2010 notification

* Revisions to deficit/surplus ratios: a positive sign means an improved government balance relative to GDP, and a negative sign a worsening.

Annex 2

Supplementary tables for the financial crisis

Activities undertaken by government to support financial institutions1

Table 1: Net revenue/cost for general government recorded in ESA95 government deficit

Millions of euro

Source: Eurostat

Table 2: Outstanding amount of assets, actual liabilities4 and contingent liabilities of general government

Millions of euro3

Source: Eurostat

The supplementary tables for the financial crisis aim to give a complete picture of the actual and potential impact on government deficit and debt due to government interventions relating to the financial crisis.

These tables are only intended to show government interventions directly related to the support of financial institutions. Support measures for non financial institutions or general economic support measures are not included in the tables.

The first table relates to data on transactions which are recorded in government accounts and have an actual impact on the EDP deficit/surplus. The second table relates to data on stocks of financial assets and liabilities arising from interventions relating to support of financial institutions. It distinguishes between activities which have contributed to government liabilities (included in government debt) and activities which may potentially contribute to government liabilities in the future, but which are currently recorded as contingent on future events (not included for the moment in government debt).

In particular, line C in table 1 shows the net impact in terms of government surplus/deficit for government due to direct government interventions in the financial crisis. It can be seen that the figures have increased since 2008 and that these interventions increased government deficit in 2009 for the euro area by 7.3 bn or 0.08% of GDP and for the EU27 by 15.4 bn or 0.13% of GDP.

Table 2 shows that the impact on government debt in 2009 (closing balance sheet for liabilities) for the euro area was 220 bn euro or 2.4% of GDP, while for the EU27 the figure was 359 bn or 3.0% of GDP. As far as contingent liabilities are concerned (with a potential impact on debt and possibly on deficit), they amounted to 773 bn or 8.6% of GDP for the euro area and to 1192 bn or 10.1% of GDP for the EU27.

Further tables on actual and potential impact on government deficit and debt, by Member State, can be found on Eurostat's website at:

http://epp.eurostat.ec.europa.eu/portal/page/portal/government_finance_statistics/excessive_deficit/supplementary_tables_financial_turmoil

• This table relates to activities undertaken to support financial institutions. It does not include wider economic stimulus packages.

• Interest payable includes actual interest where relevant, and otherwise imputed interest on financing (see explanatory note).

• The appropriate valuation for all entries in part 2 is nominal value, except for ordinary quoted shares held as assets (which should be recorded at market value).

• By convention, for the liabilities entry under "general government" (which is the impact on Maastricht Debt from activities to support financial institutions), there is assumed to be a direct impact on government debt from activities which imply a transfer of cash from government (e.g. transfer of cash relating to capital injections, loans granted, purchase of financial assets), except for the impact from direct borrowing. In addition, imputations relating to the financing costs should be included.

• Guarantees covered are those granted by general government to non-general government units. It does not include guarantees on bank deposits, or guarantees on the liabilities of special purpose entities included in (h). It is only the value of active guarantees, not announced ceilings for schemes. It also includes guarantees on assets, which would imply incurrence of government liability in case of a call.

• Liquidity schemes included here are those where the government securities used are not recorded in government debt (see the Eurostat Decision and accompanying guidance note for details). By convention in part 2, they are recorded as "contingent liabilities outside the general government", as for guarantees, though it should be noted that the exposure of government is likely to be limited.

• Special purpose entities included here are those where government has a significant role, including a guarantee, but which are classified outside the general government sector (see the Eurostat Decision and accompanying guidance note for details). Their liabilities are recorded outside the general government sector (as contingent liabilities of general government).