In 2006, the government deficit¹ of both the Eurozone² (EA13) and the EU27 fell compared to 2005, while the government debt¹ increased in absolute terms. In the Eurozone the government deficit decreased from 2.5% of GDP in 2005 to 1.5% in 2006³, and in the EU27 it fell from 2.4% to 1.6%. In the Eurozone the government debt to GDP ratio fell from 70.3% at the end of 2005 to 68.6% at the end of 2006, and in the EU27 from 62.7% to 61.4%.

In the Eurozone, the Growth and Stability Pact requires member countries to keep within an annual deficit of 3% of Gross Domestic Product (GDP) and total government debt at a maximum of 60% of GDP.

In 2006 the largest government deficits in percentage of GDP were recorded by Hungary (-9.2%), Italy (-4.4%), Portugal (-3.9%), Poland (-3.8%), and Slovakia (-3.7%). Ten Member States registered a government surplus in 2006: Denmark (+4.6%), Finland (+3.8%), Estonia (+3.6%), Bulgaria (+3.2%), Ireland (+2.9%), Sweden (+2.5%), Spain (+1.8%), Luxembourg (+0.7%), Netherlands (+0.6%) and Belgium (+0.4%). In all, 21 Member States recorded an improved government balance relative to GDP in 2006 compared to 2005, five a worsening, and one remained unchanged.

At the end of 2006, the lowest ratios of government debt to GDP were recorded in Estonia (4.0%), Luxembourg (6.6%), Latvia (10.6%) and Romania (12.4%). Ireland's level was 25.1%. Ten Member States had government debt ratios higher than 60% of GDP in 2006: Italy (106.8%), Greece (95.3%), Belgium (88.2%), Germany (67.5%), Hungary (65.6%), Cyprus (65.2%), Portugal (64.8%), Malta (64.7%), France (64.2%) and Austria (61.7%).

In 2006, government expenditure in the Eurozone was equivalent to 47.2% of GDP, and government revenue to 45.6%. The figures for the EU27 were 46.6% and 45.0% respectively. In both zones between 2005 and 2006, the government expenditure ratio decreased slightly, while the government revenue ratio increased.

Amendments by Eurostat to reported data

Belgium: Eurostat has amended the deficit and debt data notified by Belgium for 2005 and 2006 in relation to the assumption by government (FIF – Fonds de l'infrastructure ferroviaire) in 2005 of 7400 million euro (2.5% of GDP) of the debt of the railway company SNCB. According to ESA95 rules, FIF is classified inside the government sector and the debt assumption is recorded as increasing the deficit. The impact on the government balance in 2005 is of -7073.4 million euro and in 2006 of +227.9 million euro; the impact on the government debt at the end of 2005 amounts to 5246 million euro (1.7% of GDP) and at the end of 2006 to 4982 million euro (1.6% of GDP).

United Kingdom: Eurostat has amended the deficit data notified by the United Kingdom for years 2003 to 2006 for consistency of recording of UMTS (mobile phone spectrum) licences proceeds. This leads to increase in the government deficit in 2003 and 2006 (as well as for financial year 2003/2004 and 2006/2007) by GBP 1045 mn (0.1% of GDP) and in 2004 and 2005 (financial years 2004/2005 and 2005/2006) by GBP 1044 mn (0.1% of GDP). There is no change in the reported debt figures.

Other issues

Greece notified in 2006 a substantial upwards revision of GDP (around 26%). This revision has in the last year been subject to a detailed scrutiny by Eurostat and national experts from various Member States, following recommendations from the Gross National Income Committee. As a result of this work, Greece has now notified a substantially smaller revision of GDP (around 9.6%). The new notified series are being used for the purpose of this provision of deficit and debt data.

As far as other horizontal issues are concerned, Eurostat intends in the coming months to further clarify the accounting treatment of flows and debt relating to public infrastructure investments, as well as the sector classification of the concerned public units.

Background

Eurostat, the Statistical Office of the European Union, is providing government deficit and debt data based on figures reported in the second 2007 notification by EU Member States for the years 2003-2006, for the application of the excessive deficit procedure (EDP). This notification is based on the ESA95 system of national accounts.

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

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 Eurozone and EU27 aggregates: the data are in euro. For those countries not belonging to the Eurozone, 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 Slovenia, data for years prior to 2007 have been converted into euro according to the irrevocable conversion rate.

1. Eurozone (EA13): Belgium, Germany, Greece, Spain, France, Ireland, Italy, Luxembourg, Netherlands, Austria, Portugal, Slovenia and Finland. In the attached tables, the Eurozone is defined as including Slovenia for the full period, though Slovenia joined the Eurozone on 1 January 2007.
2. In the previous notification, the 2006 government deficits for the Eurozone and the EU27 were 1.6% and 1.7% of GDP respectively. The government debt of the Eurozone was 69.0% of GDP and of the EU27 61.7% of GDP. See News Release 55/2007 of 23 April 2007.
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 the 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 transaction;
• 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 2006, for most Member States the difference, if any, between the two balances is minor except in Greece (0.26%), Denmark (0.14%), Austria (0.13%), Sweden (0.13%) and Finland (0.11%). These differences improve net lending/net borrowing for EDP purposes for all these countries.

The data reported by Sweden are not strictly comparable to those of the other countries, as Sweden reports interest on an unconsolidated basis, which results in an overestimation of government revenue and expenditure; however, this has no consequences on the government balance and debt.

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.

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

* Belgium has reported government expenditure and revenue data without taking into account the assumption by government (FIF) in 2005 of 7 400 million euro of debt of the railway company SNCB. Eurostat has adjusted figures for 2005 and 2006 in order to follow ESA95 rules.

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

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