Structure of government debt
From Statistics Explained
This article presents recent statistics on the structure of general government debt and its relationship to gross domestic product (GDP) in the European Union (EU). In the context of the SGP's Excessive deficit procedure notification process, Eurostat publishes government debt data twice a year, in April and October, as well as quarterly government debt data transmitted to it in line with Regulation 1222/2004.
In order to analyse the debt structure in European countries, Eurostat produces in addition an annual survey collecting Member States' information on debt by sector of debt holder, by instrument, by initial and remaining maturity and by currency of issuance. In addition, the survey contains information on guarantees granted by the general government to non-government units. These are contingent liabilities which are not included in general government gross debt. This article examines the main results of the latest questionnaire, fully or partly completed by 28 EU and EFTA countries.
- 1 Main statistical findings
- 1.1 Maastricht debt as a percentage of GDP
- 1.2 Breakdown by subsector of general government
- 1.3 Impact of consolidation
- 1.4 Breakdown by financial instrument
- 1.5 Breakdown by sector of debt holder
- 1.6 Breakdown by initial maturity
- 1.7 Breakdown by currency of issuance
- 1.8 Apparent average cost of government debt
- 1.9 Government guarantees as a percentage of GDP
- 2 Data sources and availability
- 3 Context
- 4 Further Eurostat information
Main statistical findings
Maastricht debt as a percentage of GDP
In general Maastricht government debt has followed an upward trend over recent years, although quarterly decreases in terms of GDP were noted for the EA-18 in 2013Q3 and 2013Q4. This trend continued for 22 EU Member States between 2012 and 2013. In contrast, the debt of Latvia (-2.7 % of GDP), Germany (-2.6 pp of GDP), Lithuania (-1.1 pp of GDP), Denmark (-0.9 pp of GDP), Hungary (-0.6 pp of GDP) and the Czech Republic (-0.2 pp of GDP) decreased in 2013.
18 out of 28 EU Member States reported debt to GDP ratios over the reference value of 60 %. Greece recorded the highest debt ratio at 175.1 %, followed by Italy at 132.6 %. The lowest debt to GDP ratio was registered by Estonia at 10.0 %, followed by Bulgaria at 18.9 % of GDP at the end of 2013.
For both EU-28 and EA-18 the development of the Maastricht debt in terms of GDP followed a similar path, amounting to 87.1 % and 90.6 % respectively in 2013. The relative increase from 2012 to 2013 of EA-18 and EU-28 debt was the same (both 1.9 pp).
The highest increase in debt to GDP ratios was observed in Cyprus with 25.1 percentage points (pp), mainly due to financial assets needed to support banks. Greece recorded the second strongest increase at 17.9 pp, mainly due to bank recapitalisation operations, followed by Slovenia at 17.3 pp, influenced by capital transfers to financial institutions and Croatia at 11.2 pp.
Breakdown by subsector of general government
- Central government (S.1311);
- State government (S.1312);
- Local government (S.1313);
- Social security funds (S.1314).
Figure 2 gives an overview of the subsector breakdown, as a percentage of total debt for all subsectors, i.e. not consolidated between different levels of government.
For 26 out of the 28 EU Member States and Norway, the central government represented more than 75 % of general government debt (not consolidated between subsectors). By contrast, the debt share of local government exceeded 40.5 % in Norway, followed by Estonia (32.7 %), Sweden (18.1 %) and Denmark (16.7 %). State government as a subsector of general government exists only in four Member States - Belgium, Germany, Spain and Austria. The debt share of state government was particularly significant in Germany (29.9 %) and Spain (18.8 %), while in Belgium and Austria the share constituted roughly 7 % of general government debt (7.2 % in both countries). The impact of social security funds in the general government debt continues to be small: contributions of less than 5 % were recorded in 22 countries. In contrast, two countries had higher ratios of debt for social security funds: Lithuania (19.4 %) and France (10.9 %).
Impact of consolidation
General government debt has to be consolidated within each subsector and between subsectors at the level of general government. This implies that the debt issued by one subsector and held by another one should be excluded from the general government debt. When debt of one subsector of general government is held by another subsector, general government gross debt is then lower than the sum of subsector gross debt. Table 1 illustrates this effect in percentage of total non-consolidated debt.
The majority of countries show a limited consolidation impact. For 24 of the 28 EU Member States and Norway, the general government debt was reduced by less than 6 %. A significant consolidation effect was observed in Cyprus (43.4 %), Lithuania (21.2 %), Spain (14.7 %), Latvia (12.6 %) and the Netherlands (10.3 %). On the other hand, eight countries showed no consolidation effect or one below 1 %: the Czech Republic, Denmark, Germany, Croatia, Hungary, Malta, Norway and Slovenia.
Breakdown by financial instrument
The Maastricht debt is divided into the following categories according to the ESA95 classification:
- currency and deposits (AF.2);
- securities other than shares, excluding financial derivatives (AF.33), and
- loans (AF.4).
The breakdown of debt by financial instrument is presented in Figure 3.
For the EU-28, 80.7 % of general government debt was made up by securities other than shares (excluding financial derivatives), 15.7 % was made up by loans and 3.6 % by currency and deposits. For the EA-18, 78.9 % of general government gross debt was made up by securities other than shares (excluding financial derivatives), 18.3 % was made up by loans and 2.8 % by currency and deposits.
For 25 out of 29 countries at the end of 2013 for which data is available, the most used debt instrument remained securities other than shares; between 51.2 % and 91.8 % of the general government debt was financed by securities issuance. Estonia and Greece registered a different breakdown, with loans making up 86.3 % and 74.9 % respectively of the total debt. Significant loan to total debt ratios were also recorded in Cyprus (58.9 %), Latvia (53.9 %), Norway (46.7 %), Portugal (43.9 %) and Luxembourg (40.1 %). The countries reporting higher shares of loans tended to be those either having a relatively low level of general government gross debt or benefitting from loans of EFSF, ESM and other international assistance. At the end of 2013, currency and deposits represented less than 5 % of total debt for 26 countries. In contrast, they accounted for 9.6 % of total general government gross debt in Ireland, 8.7 % in the United Kingdom and 7.7 % in Italy.
Breakdown by sector of debt holder
Figure 4 presents general government gross debt by sector of the debt holder: non-financial residents (non-financial corporations, households and non-profit institutions serving households), financial residents (financial corporations) and non-residents (rest of the world).
The debt share of non-residents was significant for most of the countries but highly variable between countries: It ranged between 1.5 % and 81.6 % of the general government debt in the 24 EU and EFTA countries for which data is available. Twelve countries recorded percentages higher than 50 %: Finland (81.6 %), Latvia (80.0 %), Austria (71.6 %), Lithuania (69.9 %), Slovenia (69.2 %), Portugal (66.4 %), Estonia (64.9 %), Ireland (61.9 %), Slovakia (61.3 %), Hungary (57.7 %), France (57.3 %) and the Netherlands (52.8 %). In contrast, this proportion was below 10 % in Luxembourg (1.5 %) and Malta (7.0 %). The resident financial sector accounted for between 60.5 % and 98.5 % in Luxembourg (98.5 %), Romania (71.3 %), Croatia (63.5 %) and Malta (60.5 %). The resident non-financial sectors played a major role as debt holder in Poland (33.7 %) and Malta (32.5 %), followed by Italy (12.6 %), Ireland (10.0 %) and Hungary (9.7 %).
Breakdown by initial maturity
The debt questionnaire aims to provide detailed information on the time structure of government debt based on its initial maturity. The maturity is subdivided into several maturity brackets: less than one year, one to five years, five to seven years, seven to ten years, ten to fifteen years, fifteen to thirty and more than thirty years as well as the summary category of more than one year. For some countries, which did not provide the complete breakdown, only two categories are shown: less than one year (short-term) and more than one year (long-term). For the other fifteen countries, a detailed debt maturity breakdown is available. The ratio of medium/long-term and short-term debt to total debt is illustrated in Figure 5.
The gross debt classified by maturity reveals a common pattern: between 72.0 % and 99.9 % of the outstanding debt was issued on a medium to long-term basis. Short-term debt levels of less than 5 % were recorded in Bulgaria (2.2%), Estonia (0.2%), Austria (3.1%), Poland (0.1%), Slovakia (0.4%) and Slovenia 2.9%). Norway and Sweden had a significant short-term debt ratio (28.0% and 21.7 % respectively), while the short-term debt ratio also exceeded 10% in Germany, France, Croatia, Italy, Hungary and the Netherlands. The countries providing a detailed long-term debt breakdown had very different structures.
Breakdown by currency of issuance
As shown in Figure 6, of the 26 respondents to the survey on this, the majority issue all or almost all of their debt in national currency. Over 99 % of the the stock of central government stock debt was denominated in national currency in eleven countries. In particular, Estonia, Luxembourg, Austria, Finland and the United Kingdom issued 100 % of their debt in national currency, while this ratio was above 99 % in France, Malta, Italy, Slovenia, Belgium and Spain. Only eight countries out of 26 survey respondents issued less than 80 % of their debt in national currency: Lithuania (20.0 %), Croatia (25.7 %), Bulgaria (30.9 %), Romania (44.8 %), Hungary (58.3 %), Sweden (69.1%), Poland (70.1 %) and Latvia (75.9 %).
Figure 7 presents the share of outstanding central government debt issued in euro. The debt denominated in euro is equal to the debt issued in national currency for the euro area member countries. 100 % of the stock of government debt was denominated in euro for Estonia, Luxembourg, Austria and Finland. Significant percentages (higher than 90 %) were recorded by the same ten EA Member States as above. In contrast, in the non-euro countries the Czech Republic, Denmark, Poland and Sweden, the major issuing currency was the national currency. None of the total UK debt was issued in euro. For Lithuania, a significant part of the debt was neither in euro nor in national currency. This can be explained by a previous pegging of the national currency litas to the SDR basket and the US dollar respectively. In Croatia, the predominant currency of issuance was the euro.
Apparent average cost of government debt
The apparent average cost of central government debt (accrued interest payable over the period as a percentage of the average outstanding debt) shows the differences between countries in terms of their cumulated past conditions for accessing financial markets. Based on 23 replies from EU Member States, the analysis of apparent average cost of government debt is shown in Figure 8.
The apparent average cost of central government gross debt varied between 1.6 % in Estonia and 5.8 % in Hungary in 2013. Comparing the 2012 data with 2013, no significant changes were registered for 23 EU Member States. Decreases were observed in twenty countries: Belgium, Bulgaria, Czech Republic, Germany, Estonia, Greece, Spain, France, Croatia, Italy, Latvia, Lithuania, Malta, the Netherlands, Austria, Portugal, Romania, Slovakia, Finland and Sweden. The other three survey respondents recorded increases: Ireland (0.47 %), Hungary (0.20 %) and Slovenia (0.74 %). As this measure of the cost of debt is an average of the stock of debt issued in the past, it is not very sensitive to the most recent market trends, provided that the composition of debt is mainly long-term.
Government guarantees as a percentage of GDP
Countries were additionally asked about the amount of government guarantees. These guarantees are not part of general government gross debt, as they are contingent liabilities. They should not be added to the Maastricht debt.
Based on 22 replies from EU Member States as well as Norway, the ratio of government guarantees provided by central government on debt of non-government units, as a percentage of GDP, is shown in the following graph. In 2013, the amount of government guarantees as a percentage of GDP did not exceed 10 % for 13 countries. A ratio to GDP of less than 5 % was recorded in Estonia, Greece, Latvia, Lithuania, Romania, Slovakia and Sweden. The highest ratios to GDP were registered in Ireland (41.4 %), followed by Austria (24.5 %). A decrease of 29.1 pp was noted for Ireland.
Data sources and availability
Market vs face value
The market value is the price of a security as determined dynamically by buyers and sellers in an open market.
In Council Regulation (EC) No 3605/1993, as amended, instead of nominal value, the face value is used. This is equal to the amount (contractually agreed) that the government will have to refund to creditors at maturity.
Debt statistics cover data for general government as well as its sub-sectors: central government (S.1311), when applicable state government (S.1312), local government (S.1313) and when applicable social security funds (S.1314).
Maastricht debt comprises only the following instruments:
- AF.2: The category 'currency and deposits' consists of currency in circulation and all types of deposits in national and in foreign currency.
- AF.33: The category 'securities other than shares' consists of financial assets that are bearer instruments, are usually negotiable and traded on secondary markets or can be offset on the market, and do not grant the holder any ownership rights in the institutional unit issuing them.
- AF.4: The category 'loans' consists of financial assets created when creditors lend funds to debtors, either directly or through brokers, which are either evidenced by non-negotiable documents or not evidenced by documents.
Debt figures on general government statistics and each of its subsectors are reported consolidated.
Consolidation is a method of presenting statistics for a grouping of units, such as institutional sectors or sub-sectors, as if it constituted a single unit. Consolidation thus involves a special kind of cancelling out of flows and stocks: eliminating those transactions or debtor/creditor relationships that occur between two transactors belonging to the same grouping. Usually the sum of subsectors should exceed the value of the general government sector. Subsector data should be consolidated within each subsector, but not between them. ESA 95 recommends compiling both consolidated and non-consolidated financial accounts. For macro-financial analysis, the focus is on consolidated figures. The Maastricht debt is also consolidated.
The Eurostat 2013 government debt structure survey
The survey launched by Eurostat on government debt structure contains eleven tables: a set of five tables (central government debt, state government, local government debt, social security funds’ debt and general government debt) for 2012, and the same set of tables for 2013, plus a table with additional classifications of government debt.
The survey presents breakdowns for the general government and its subsectors for the two latest calendar years, categorizing the debt by sector of the debt holder, by instrument, by detailed initial and remaining maturity, by currency of issuance, as well as guarantees granted by the government to non-government units.
The analysis on breakdown by currency, apparent cost of the debt and state guarantees is based on central government data. GDP supplied in the context of the EDP April 2014 notification is used in the graphs and analysis.
For the EU-28, EA-18 and Cyprus, data from ESA table 28 supplied in April 2014 is used to complement the analysis.
For all other 27 EU Member States and Norway, the data used in this article was reported in the structure of government debt survey. The survey is not fully completed by all countries. Hence the number of countries shown for each breakdown of gross debt as well as guarantess varies.
Some breakdowns of gross debt by debt holder by detailed maturity, by sector of debt holder and by currency may not sum to the total debt instrument/ gross debt, in case detailed information was not available for some items.
Monitoring and keeping government debt in check is a crucial part of maintaining budgetary discipline which is essential as Europe undergoes dramatic demographic changes. Its ageing population, in particular, is expected to pose major economic, budgetary and social challenges.
The Protocol on the excessive deficit procedure (EDP) annexed to the Maastricht Treaty specifies that the ratio of gross government debt to GDP must not exceed 60 % at the end of the preceding fiscal year. The application of the Protocol is made operational by Council Regulation (EC) No 479/2009, as amended. It is important to note that there are some differences between ESA debt and Maastricht Debt (regarding the legislation of Maastricht debt, see Council Regulation (EC) No 1222/2004).
Fiscal data are compiled in accordance with national accounts rules, as laid down in the European System of Accounts (ESA 1995) adopted in the form of a Council Regulation (EC) of 25 June 1996, No 2223/1996. The full text of compilation of General government debt data complies with ESA95 rules concerning the sector classification of institutional units, the consolidation rules, the classification of financial transactions and of financial assets and liabilities and the time of recording. The valuation is however different. Debt liabilities in ESA95 are valued at market value, whereas Maastricht debt is valued at face value. All data in the publications on the structure of government debt refer to debt expressed at face value.
Further Eurostat information
- Government finance statistics – Summary tables
- Structure of government debt in Europe in 2012 - Statistics in focus 20/2013
- Structure of government debt in Europe in 2011 - Statistics in focus 34/2012
- Structure of government debt in Europe in 2010 - Statistics in focus 68/2011
- Structure of Government Debt in Europe in 2009 - Statistics in focus 3/2011
- Structure of Government Debt in Europe - Statistics in focus 110/2008
- Annual government finance statistics (t_gov_a)
- Government deficit and debt (t_gov_dd)
- Quarterly government finance statistics (t_gov_q)
- Annual government finance statistics (gov_a)
- Government deficit and debt (gov_dd)
- Quarterly government finance statistics (gov_q)
Methodology / Metadata
- Government deficit and debt (ESMS metadata file - gov_dd_esms)
- Quarterly financial accounts for general government (ESMS metadata file - gov_q_ggfa_esms)
- Quarterly government debt (ESMS metadata file - gov_q_ggdebt_esms)
- Quarterly non-financial accounts for general government (ESMS metadata file - gov_q_ggnfa_esms)
- Manual on compilation of taxes and social payments on a quarterly basis – first edition
- Manual on government deficit and debt - implementation of ESA2010 - 2013 edition
- Manual on government deficit and debt - implementation of ESA95 - 2013 edition
- Manual on quarterly non-financial accounts for general government - 2011 edition
- Manual on sources and methods for the compilation of COFOG statistics - Classifications of the Functions of Government - 2011 edition
- Manual on sources and methods for the compilation of ESA95 financial accounts - 2nd edition - 2011 update