Structure of government debt
From Statistics Explained
- Data from April 2012, most recent data: Further Eurostat information, Main tables and Database.
This article presents recent statistics on the structure of 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 Europe, Eurostat conducts an anual survey to collect data from Member States' information on debt by holder, instrument, maturity, currency of issuance, as well as guarantees granted by the government to non-government units. This article reflects the main results of the latest questionnaire, fully or partly completed by 25 Member States.
Under the terms of the Stability and growth pact, European Union Member States are obliged to ensure their debt does not exceed 60 % of their gross domestic product.
Main statistical findings
The upward trend in the EU government debt level continued in 2011, but the debt structure remained unchanged compared with 2010.
Maastricht debt as a percentage of GDP
In general the Maastricht government debt has followed an upward trend over recent years. The upward trend continued for 21 EU Member States between 2010 and 2011. In contrast, Latvia, Germany, Sweden, Luxembourg, Hungary and Estonia recorded a decreased government debt level in 2011.
14 out of 27 EU Member States reported debt to GDP ratios over the reference value of 60 %. Greece recorded the highest debt ratio with 165.3 %, followed by Italy (120.1 %). The lowest debt to GDP ratio was observed in Estonia (6.0 %). The upward trend in the government debt was confirmed by the development of the EU-27 and EA-17 debt with values over 60 % in 2011.
The highest increase of debt to GDP ratios was observed in Greece with 20.3 percentage points (pp). Ireland recorded the second strongest increase (15.7 pp), followed by Portugal (14.5 pp). The relative increase of the EU-27 debt (2.5 pp) was slightly higher than for EA-17 (1.9 pp). On the other hand, six countries recorded decreases between 2.1 pp and 0.7 pp.
Breakdown by subsector
- Central government (S.1311);
- State government (S.1312);
- Local government (S.1313);
- Social security funds (S.1314).
The breakdown by sub-sector is reflected in Figure 2. For most countries (24 out of 25 respondents) the central government represented more than 63 % of general government unconsolidated debt. A different situation was experienced in Estonia, where the debt share of the local government exceeded 52 %.
Also, other significant ratios of state and local government to total debt were recorded in Germany (36.9 %), Spain (21.5 %), Sweden (17.0 %) and Denmark (15.6 %). Social security funds had a minor impact in the general government debt: contributions of less than 4 % were recorded in 23 countries. By contrast, two survey respondents presented higher ratios of social security funds: France (11.8 %) and Lithuania (16.2 %).
Breakdown by financial instrument
The Maastricht debt can be grouped into the following categories according to the ESA95 classification:
- currency and deposits (AF.2);
- securities other than shares, excluding financial derivatives (AF.33);
- loans (AF.4).
The breakdown of debt by financial instrument is presented in Figure 3. 23 out of 25 EU Member States classified securities other than shares as the most preferred debt instrument: between 51.4 % and 93.6 % of the general government debt was financed by securities issuance. Estonia and Latvia presented a different breakdown, with loans accounting for over 70.1 % of the total debt.
Loans also made up between 31.0 % and 45.8 % of the total debt for Luxembourg, Romania, Bulgaria, Ireland and Portugal. The share of currency and deposits was rather negligible for 22 countries, with ratios less than 6 % of the total debt. By contrast, they accounted for between 8.0 % and 10.5 % for Italy, Ireland and the United Kingdom.
Breakdown by debt holder
As regards the breakdown by debt holder, the following graph illustrates the debt attribution to
- non-financial residents (households, non profit institutions serving households, and non-financial corporations);
- financial residents (financial corporations);
- non-residents (rest of the world).
The debt share of the non-residents accounted for more than 31.5 % of the general government debt in 21 EU Member States. Moreover, 12 countries recorded percentages higher than 50 %: Finland, Latvia, Austria, Lithuania, Portugal, Slovenia, Hungary, Ireland, France, the Netherlands, Germany and Belgium. By contrast, this proportion was almost negligible in Luxembourg (less than 2 %) and in Malta (less than 5 %).
The resident financial sector played a substantial role in Luxembourg, Malta, Romania and the Czech Republic, accounting for between 61.8 % and 98 %. The debt share of the resident non-financial sector was significant in Malta, representing more than 30 %, followed by Italy (15.9 %) and Germany (10.8 %).
Breakdown by maturity
Countries were asked to provide detailed information on the time structure of their government debt based on its initial maturity. The maturity was subdivided into several maturity brackets. However, because most of the countries didn't provide complete data, only two categories were kept for the analysis: less than one year (short-term) and more than one year (long-term). The ratio of long-term and short-term debt to total debt is illustrated in Figure 5.
The outstanding debt issued on a long-term basis accounted for between 74.6 % and 98.9 % of the total in 23 EU Member States, revealing a common pattern. In addition, short-term debt levels less than 5 % were recorded in Estonia, Slovenia, Poland, Bulgaria, Austria and Slovakia. Only Sweden and Romania presented a significant short-term debt ratio (higher than 23 %).
Breakdown by currency
20 EU Member States issued more than 68 % of their government debt in national currency. Furthermore, the United Kingdom, Finland, Luxembourg and Belgium presented a 100.0 % debt ratio issued in national currency. Significant percentages (over 96 %) were also observed in the Netherlands, Germany, Austria, Spain, Slovakia, Slovenia, Italy, Estonia, France and Malta. On the contrary, Lithuania has a 91.1 % debt ratio issued in foreign currency, followed by Latvia (77.0 %) and Bulgaria (71.9 %). This is reflected in Figure 6.
The share of outstanding government debt issued in euro is presented in Figure 7. The debt denominated in euro is equal to the debt issued in national currency for the euro area member countries. The share of government debt issued in euro was 100 % for Finland, Luxembourg and Belgium. Significant percentages (higher than 96 %) were shown by the same ten EA Member States as above. Less than 21.4 % of the debt was denominated in euro for Sweden, Denmark, the Czech Republic and Poland. The UK debt did not issue any debt in euro.
Impact of consolidation
According to the Maastricht definition, the general government debt has to be consolidated. This implies that the debt issued by one sub-sector and held by another one should be excluded from the general government debt. The result of the consolidation is usually a lower general government debt. This effect is shown in Table 1.
A very significant consolidation effect was obtained in countries with a high intra-sector debt: Lithuania, Latvia and Spain, with ratios between 15.1 % and 10.9 %. By contrast, a rather negligible impact was observed for sixteen countries, where the effect was less than 8 %. Furthermore, six countries showed almost no consolidation effect. This was the case for Malta, the Czech Republic, Hungary, Slovenia, Germany and Denmark, with ratios of less than 1 %.
Apparent average cost of government debt
The differences between countries in terms of their conditions for accessing financial markets are shown by the apparent cost of the debt (interest over total nominal debt). Based on 20 replies from EU Member States, the analysis of apparent average cost of government debt is reflected in Figure 8.
The apparent average cost of debt ranged between 1.7 % (Latvia) and 5.2 % (Romania) in 2011. However, comparing the 2010 data with 2011, no significant changes were registered for 19 EU Member States. A slight decrease (less than 1 %) was observed in eight countries: Lithuania, Ireland, Romania, the Czech Republic, Poland, Finland, Belgium and Latvia. The apparent cost of debt remained unchanged for Slovenia and Malta, while the other nine survey respondents recorded increases of less than 0.5 %. Only Sweden recorded an increase of 2.8 %.
State guarantees as a percentage of GDP
State guarantees are not part of government debt, but are contingent liabilities. Based on 20 replies from EU Member States, the ratio of state guarantees to the debt of non-government units, as a percentage of GDP, is shown in Figure 9.
For 12 countries, the amount of state guarantees as a percentage of GDP did not exceed 10 %. A share of less than 4 % was recorded in Slovakia, Estonia, Lithuania, Poland, Bulgaria, Latvia and Romania. State guarantees accounted for between 12.2 % and 18.0 % in in Finland, Portugal, Denmark, Belgium, Malta and Slovenia. The highest value was registered in Ireland (110.3 %), followed by Austria (38.1 %).
Portugal and Ireland recorded the highest relative increase compared to the previous year with 6.6 pp and 4.0 pp respectively. Decreases of between 4.3 pp and 2.2 pp were noted for Austria, Belgium, Slovenia and Denmark.
Data sources and availability
The Eurostat 2011 government debt structure survey
The survey launched by Eurostat on government debt structure contains nine tables: a set of four tables (central government debt, state and local government debt, social security funds’ debt and general government debt) for 2010, and the same set of tables for 2011, plus a table with additional classifications of government debt.
The survey presents breakdowns for the general government and its sub-sectors for the two latest calendar years, categorizing the debt by holder, instrument, maturity, currency of issuance, as well as guarantees granted by the government to non-government units.
Debt statistics cover data for general government as well as its sub-sectors: central government (S.1311), local government (S.1313), social security funds (S.1314), and when applicable state government (S.1312).
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 sub-sectors 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 sub-sectors should exceed the value of the general government sector. Sub-sector data should be consolidated within each sub-sector, 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.
Market vs nominal 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, the nominal value is considered equivalent to the face value of liabilities for securities. It is therefore equal to the amount (contractually agreed) that the government will have to refund to creditors at maturity.
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 nominal value. All data in the publications on the structure of government debt refer to debt expressed at nominal value.
Further Eurostat information
- 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
- Government finance statistics – Summary tables
- Annual government finance statistics (t_gov_a)
- Government deficit and debt (t_gov_dd)
- Other government indicators (t_gov_oth)
- Annual government finance statistics (gov_a)
- Government deficit and debt (gov_dd)
- Quarterly government finance statistics (gov_q)
- Other government indicators (gov_oth)
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)
- Public procurement advertised in the Official Journal (as a % of total public procurement and as a % of GDP) (ESMS metadata file - gov_oth_procur_esms)
- State aid (ESMS metadata file - gov_oth_staid_esms)
- Manual on sources and methods for the compilation of ESA95 financial accounts
- ESA95 manual on government deficit and debt
- Manual on sources and methods for the compilation of COFOG statistics