Euro area sovereign debt fell slightly, but remained sky-high at the end of the second quarter of 2022. The total amount of debt in the eurozone was as high as 94.2 percent of the size of the economy, according to the European statistical office Eurostat.
The debts have increased considerably because governments had to borrow a lot of money to pay for all economic support measures after the outbreak of the corona pandemic. Now the energy crisis and the war in Ukraine are causing unexpected additional expenses.
In the first quarter, government debt still amounted to 95.2 percent of the gross domestic product (GDP), the measure of economic growth, of the euro area countries. The decrease in the level of debt is due to the fact that the GDP figure has increased. In absolute terms, government debt continued to rise in the third quarter. In the second quarter of 2021, government debt was as high as 97.9 percent of GDP.
Public debt is still much higher than EU member states agreed in their 1997 stability and Growth Pact. Those budget rules, which stipulate a government debt of no more than 60 percent, have been suspended due to the corona pandemic in order to enable large-scale government support. Greece, Italy, Portugal, Spain, France and Belgium had the highest public debt at the end of the second quarter. It was lowest in Estonia, Bulgaria and Luxembourg. In the Netherlands, the national debt increased slightly to 50.9 percent.
German Finance minister Christian Lindner said in september that it was time for the eurozone countries to return to fiscal discipline, partly due to high inflation. According to him, the European Central Bank’s interest rate hikes are a strong signal in the fight against inflation and the member states must now also fulfil their duties.
The average budget deficits of the euro area countries continued to decline. Where in the first quarter it was still 2.5 percent of the size of the economy, in the second quarter it was 2.1 percent. This is partly due to higher tax revenues, slightly lower government spending and stronger economic growth during that period. In the second quarter of 2021, there was still a budget deficit of 6.4 percent.