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EuCham - European Chamber - 2015-07 Government debt as a percentage of GDP

     


     
     
     



2015-07 Government debt as a percentage of GDP

Government debt or ‘public debt’ is defined as the total amount of money owed by the government to creditors. After the financial crisis, which began in the late 2007, European countries highly increased their percentage of government debt.

Currently, Greece has the highest government debt to GDP ratio of 174%, which led the country to debt crisis and a possibility of default. In a five year period, the country has been lent an astonishing amount of money in not just one but two bailouts, resulting in $275 billion, worth more than the country’s entire economic output. Following Greece are Italy (2nd), Cyprus (3rd) and Belgium (4th) whose high public debt may reduce their long-run growth and may partly negate the positive effects of the fiscal stimulus.

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EuCham Charts
July 2015
Government debt as a percentage of GDP

 

   Country Government debt to GDP 2009 (%)   
Government debt to GDP 2014 (%)     
 1 Greece

133

 174 

2

Italy

117

132
3

Cyprus

97 108

4

Belgium

87

106

...

 

 

 

43

Estonia 4 11
  

EuCham data based on "The World Bank report"
43 European countries were considered

 

EuCham_Charts_Logo.jpg

 

  • Greece has currently the highest government debt to GDP ratio of 174%

  • Italy, Cyprus and Belgium have substantially increased their public debt that may lead to negative consequences in the long run.

  • Estonia has the lowest national debt of 11%, showing successful management of the government's finances.

Source: eucham.eu/charts

 

Detailed Information

Government debt or ‘public debt’ is defined as the total amount of money owed by the government to creditors. After the financial crisis, which began in the late 2007, European countries highly increased their percentage of government debt. Decreased tax revenues, recapitalisation of banks and simultaneous massive economic programs influenced the increase in public debt and resulted in different outcomes, described below.

European countries which took high advantage of these positive conditions for raising government debt found themselves in a particularly dangerous trajectory of ineptness in recent years. As a result, instead of improving their economic positions, this led to negative consequences, such as reduction in long-run economic growth.

Currently, Greece has the highest government debt to GDP ratio of 174%, which led the country to debt crisis and a possibility of default. In a five year period, the country has been lent an astonishing amount of money in not just one but two bailouts, resulting in $275 billion, worth more than the country’s entire economic output. Following Greece are Italy (2nd), Cyprus (3rd) and Belgium (4th) whose high public debt may reduce their long-run growth and may partly negate the positive effects of the fiscal stimulus.

Contrary to the countries with high government debt to GDP ratio, Estonia and Switzerland have successfully managed their finances, meaning that their governments maintain their internal funds sufficiently, ensuing the ability to repay their debt without issuing high amount of further national debt. However, Russia possesses an uncommon case in which the government debt to GDP ratio of 12% is relatively low. Russia defaulted in 1988 because the markets were not willing to offer them attractive loans and thus, they were forced to use alternative funding sources such as gaining large trade surplus from rise in oil prices.

In conclusion, it can be seen that between 2009 and 2014, the government debt to GDP ratio has increased in all countries, with the only exceptions being Norway and Turkey. Unfortunately, many countries need to be reminded on the line limit- a line which may result in economic destabilisation and reduction of the growth in the long-run.

Methodology

The data for the countries are collected from the World Bank report from years 2009 and 2014 respectively. Government debt to GDP ratio represents the gross amount of government liabilities reduced by the amount of equity and financial derivatives held by the government. For measuring the government debt to GDP ratio, the central government debt, total % of GDP indicator was used.

 

Map 1: Government debt to GDP ratio 

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 Figure 1: Increase in government debt to GDP ratio

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Table 1: Government debt to GDP ratio  

 

Rank  

Country

Government 
debt to GDP 2009 (%)   

Government
debt to GDP 2014 (%)   

1

Greece

133

174

2

Italy

117

132

3

Cyprus

89

108

4

Belgium

87

106

5

Spain

46

98

6

Ireland

67

98

7

France

83

95

8

United Kingdom   

69

89

9

Portugal

65

87

10

Iceland

71

86

11

Austria

69

85

12

Slovenia

22

81

13

Croatia

36

81

14

Germany

47

75

15

Ukraine

25

71

16

Serbia

28

71

17

Netherlands

54

69

18

Malta

82

68

19

Albania

55

61

20

Finland

41

59

21

Azerbaijan

50

59

22

Montenegro

29

57

23

Slovakia

28

54

24

Hungary

48

53

25

Poland

47

50

26

Denmark

37

45

27

Sweden

39

44

28

Czech Republic

29

43

29

Lithuania

29

41

30

Romania

13

40

31

Latvia

30

40

32

Belarus

19

37

33

Georgia

27

37

34

Turkey

54

33

35

Armenia

14

30

36

Switzerland

24

29

37

Bulgaria

13

28

38

Bosnia

17

28

39

Macedonia

21

28

40

Norway

36

26

41

Luxembourg

13

24

42

Russia

9

12

43

Estonia

4

11

 

No data: Andorra, Kazakhstan, Kosovo, Liechtenstein, Monaco, San Marino
The data has been ranked according to Government debt to GDP 2014

Source: The World Bank
EuCham Research Department - Compiled by Sofija Daceva 2015-07-07

 

 

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