Eurozone sees North South debt divide

Public debt levels in the eurozone neared their projected peak last year after more than a decade of huge borrowing, but data also highlighted a divide between the richer north and Mediterranean countries where the burden is still growing.
By The Newsroom
Published 24th Jan 2013, 06:00 BST

Government debt stabilised at 90 per cent of economic output in the 17 nations sharing the euro in the third quarter, barely changed from 89.9 per cent in the second, the EU’s statistics office Eurostat said yesterday.

With public debt expected to peak at 94.5 per cent in all of 2013, according to European Commission forecasts, the stabilisation is another sign the eurozone has a chance to emerge from a banking and debt crisis that nearly destroyed it.

Hide Ad
Hide Ad

But while the Commission expects debt to start falling from 2014, it is still above the 90 per cent level that economists consider damaging for growth.

It is also well above the EU’s limits for a healthy economy and will take decades to pay down.

Europe’s debts soared from the EU-mandated limits of 60 per cent of gross domestic product following the introduction of the euro in 1999, as countries from Spain to Ireland indulged in massive borrowing at very low rates of interest.

A divide now exists between France and Germany on the one hand, where debt fell slightly in the third quarter from the second, and the economies of Ireland, Greece, Portugal, Spain and Italy, whose debt-to-GDP ratio rose in the July-September period.

Debt in Ireland reached 117 per cent of economic output in the quarter.

Related topics:IrelandEuropeSpain