Press Releases

STAT/09/56

22 April 2009

Provision of deficit and debt data for 2008 - first notification
Euro area and EU27 government deficit at 1.9% and 2.3% of GDP respectively
Government debt at 69.3% and 61.5%

In 2008, the government deficit¹ and government debt¹ of both the euro area² (EA16) and the EU27 increased compared with 2007. In the euro area the government deficit to GDP ratio increased from 0.6% in 2007³ to 1.9% in 2008, and in the EU27 it increased from 0.8% to 2.3%. In the euro area the government debt to GDP ratio increased from 66.0% at the end of 2007 to 69.3% at the end of 2008, and in the EU27 from 58.7% to 61.5%.

In 2008 the largest government deficits in percentage of GDP were recorded by Ireland (-7.1%), the United Kingdom (-5.5%), Romania (-5.4%), Greece (-5.0%), Malta (-4.7%), Latvia (-4.0%), Poland (-3.9%), Spain
(-3.8%), France (-3.4%), Hungary (-3.4%), Lithuania (-3.2%) and Estonia (-3.0%). Seven Member States registered a government surplus in 2008: Finland (+4.2%), Denmark (+3.6%), Luxembourg (+2.6%), Sweden (+2.5%), Bulgaria (+1.5%), the Netherlands (+1.0%) and Cyprus (+0.9%). In all, five Member States recorded an improved government balance relative to GDP in 2008 compared with 2007, 21 a worsening and one remained unchanged.

At the end of 2008, the lowest ratios of government debt to GDP were recorded in Estonia (4.8%), Romania (13.6%), Bulgaria (14.1%), Luxembourg (14.7%) and Lithuania (15.6%). Nine Member States had government debt ratios higher than 60% of GDP in 2008: Italy (105.8%), Greece (97.6%), Belgium (89.6%), Hungary (73.0%), France (68.0%), Portugal (66.4%), Germany (65.9%), Malta (64.1%) and Austria (62.5%).

In 2008, government expenditure⁴ in the euro area was equivalent to 46.6% of GDP and government revenue⁴ to 44.7%. The figures for the EU27 were 46.8% and 44.5% respectively. In both zones, the government expenditure ratio increased between 2007 and 2008, while the government revenue ratio decreased.

Reservations on reported data⁵

Denmark: During 2008 the Danish authorities nationalised the Roskilde Bank and established a vehicle for bank rescues (AFS-Afviklingsselskabet). These bodies have been classified as financial corporations in the reported Danish data. Eurostat is investigating these cases.

United Kingdom: Eurostat has withdrawn the reservation on the data reported by the United Kingdom in the October 2008 notification (News release 147/2008 of 22 October) following a clarification that the Bank of England lending to Northern Rock was undertaken under the direction of the UK tripartite authorities (HM Treasury, the Bank of England, the Financial Services Authority).

From April 2008 the United Kingdom government provided 185 billion GBP of treasury bills to the Bank of England for use in the Special Liquidity Scheme. These bills are not currently recorded as part of United Kingdom government debt. Eurostat is considering the appropriate treatment of these bills, and whether or not they should be statistically included as part of United Kingdom government debt.

Amendment by Eurostat to reported data⁶

United Kingdom: Eurostat has amended the deficit data notified by the United Kingdom for the years 2005 to 2008 for consistency of recording of UMTS licences proceeds in 2000. This leads to an increase in the government deficit in 2005, 2007 and 2008 (as well as for financial year 2004/2005, 2005/2006 and 2007/2008) by 1044 mn GBP (0.1% of GDP) and in 2006 (financial year 2006/2007) by 1045 mn GBP (0.1% of GDP). There is no change in the reported debt figures.

Other issues

Eurostat is in the process of drawing up guidance on the statistical treatment of public operations to support financial markets. Given the complexity and variety of such operations across countries, there is a need for a consistent package of guidance following ESA95 rules.

Background

In this News Release Eurostat, the Statistical Office of the European Communities, is providing⁷ government deficit and debt data based on figures reported in the first 2009 notification by EU Member States for the years 2005-2008, 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 2008 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/pls/portal/url/page/PGP_DS_GFS/PGE_DS_GFS_0

1. 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.

1. 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.
2. In the previous provision of data for the excessive deficit procedure, the 2007 government deficits for the EA15 and the EU27 were 0.6% and 0.9% of GDP respectively. The government debt of the EA15 was 66.3% of GDP and of the EU27 58.7% of GDP. See News Release 147/2008 of 22 October 2008.
3. 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 2008, for most Member States, the difference, if any, between the two balances is minor.

1. The term “reservations” is defined in article 8h (1) of Council Regulation 3605/93, as amended. The Commission (Eurostat) expresses reservations when it has doubts on the quality of the reported data.
2. According to Article 8h (2) of Council Regulation 3605/93 as amended, 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).
3. According to Article 8g (1) of Council Regulation 3605/93, 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 3605/93, as amended (consolidated version available at
http://eur-lex.europa.eu/LexUriServ/site/en/consleg/1993/R/01993R3605-20051223-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.

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

Main revisions between the October 2008 and April 2009 notifications

Below are shown country specific explanations for the largest revisions in deficit and debt for 2005-2007 between the October 2008 and April 2009 notifications, as well as in GDP.

Deficit

Czech Republic: The decrease in the deficit for 2007 is due to the revision of data on accrual taxes, mainly excise duties on tobacco products.

Denmark: The decrease in the surplus for 2007 is mainly due to a downward revision of data on tax revenues.

Latvia: The increase in the deficit for 2006 and 2007 is due to updated source data for other central and local government bodies.

Lithuania: The decrease in the deficit for 2007 is due to updated source data on accrued current expenditure.

Luxembourg: The increase in the surplus for 2007 is due to updated source data.

Malta: The increase in the deficit for 2006 and 2007 is due to updated information on subsidies paid by government to Enemalta (2006 and 2007) and an adjustment for a delayed payment to social security (2007).

Sweden: The increase in the surplus for 2006 and 2007 is mainly due to updated source data relating to taxes and a downward correction of the GNI based contribution to the EU budget.

Debt

Denmark: The increase in government debt for 2005-2007 is due to a change in the recording of debt, guaranteed by government, relating to urban renewal.

GDP

The GDP notified in April 2009 for EDP purposes was revised by a number of Member States compared to that notified in October 2008, most notably for 2007 by Latvia (5.6% upwards) and Romania (2.0% 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 2008 to the April 2009 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 2008 to the April 2009 notification

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