Euro area: Debt Figures Slightly Worse than Expected

• The Euro area debt reached record high 85.1% of GDP in 2010 and the public deficit decreased slightly to 6.0% in 2010 - far from the 60% and 3% upper limit as dictated in the Stability and Growth Pact.
• The country rumoured to be first in line for a potential future debt restructuring, Greece, reached a record high public debt of 142.2% of GDP in 2010. The Greek budget deficit was at 10.5% of GDP surpassing expectations.
• Portugal's deficit has been revised higher for 2007-9 and the debt figure has been lifted by 5.5% of GDP in 2007 and 6.9% of GDP in 2010. Portugal's debt stood at 93% of GDP and the deficit was only reduced to 9.1% of GDP in 2010.

The Euro area debt reached record high 85.1% of GDP in 2010 up from 79.3% in 2009. The Euro area public deficit decreased slightly to 6.0% in 2010 from 6.3% in 2009. This is far from the 60% and 3% upper limit as dictated in the Stability and Growth Pact.

The country rumoured to be first in line for of a potential future debt restructuring Greece, still holds the Euro area record when it comes to public debt. The Greek debt reached 142.2% in 2010. The Greek budget deficit was at 10.5% of GDP in 2010 down from 15.4% of GDP in 2009. Government expenditures amounted to 49.5% of GDP - bringing it down to the 2008 level. There have been minor revisions of the Greek deficit in 2008-9 and the debt in 2007-9 but as usual all revisions are in the wrong direction.

Things have turned out substantially worse than the Greek government expected. In the stability programme that was made by the Greek government a little more than a year ago the ministry expected a budget deficit of 8.7% of GDP in 2010. In the adjustment programme that followed the bailout package in May it was expected that the deficit in 2010 would be 8.1% and that government debt would peak at around 150% of GDP in 2013. This seems very unlikely and, to be fair, it seems more plausible that the debt will peak at around 160% of GDP according to our calculations. Consequently, a debt restructuring seems increasingly likely.

In 2010 Greece was surpassed in deficit only by Ireland (32.4% of GDP) due to one-off government involvement in bailing out Irish banks. Ireland's debt stood at 96.2 of GDP in 2010.

Portugal's deficit has been revised slightly higher for 2007-9 and the debt figure has been lifted by 5.5% of GDP back in 2007 and as much as 6.9% of GDP in 2010. Portugal's debt thus stood at 93% of GDP and the deficit was only reduced from 10.1% in 2009 to 9.1% of GDP in 2010. Comparing the data to the Stability programme presented by the Portuguese ministry of Finance a year ago, it anticipated a deficit of 8.3% and a debt level of 86% of GDP. It expected the debt level to peak at 91% of GDP in 2012 - a level we have already surpassed with today’s release.