View 1 Item
Associated Press
Commuters wait at a bus stop during a strike by metro services and a four-hour work stoppage by suburban railway and tram employees, Athens, Wednesday, Jan. 23, 2013. Striking metro workers in Athens defied a court order to return to their jobs and continued their protest for a seventh day on Wednesday, as demonstrations against new pay cuts escalated in the Greek capital. (AP Photo/Petros Giannakouris)

BERLIN — The eurozone failed to reduce its government debt in the third quarter of last year, as meager growth offset efforts by several of the bloc's 17 nations to improve their finances by cutting spending and raising taxes, according to official data released Wednesday.

The countries' total government debt relative to their annual economic output was barely changed at 90 percent of gross domestic product in the third quarter of 2012 compared with 89.9 percent for three months earlier, the EU's statistics office Eurostat reported. It was up from 86.8 percent of GDP a year earlier.

"The cause behind the slight increase is no longer a growing debt pile, but a shrinking gross domestic product," said Ulrich Kater, an economist with Germany's DekaBank.

"It is positive news that the trend of increasing debt, which began with the financial crisis five years ago, has been stopped," he added.

But shrinking economies make it difficult for eurozone countries to get debt levels under control despite pushing through harsh spending cuts and reforms because shrinking output makes the value of a country's debt as a proportion of the size of its economy worse.

More than three years after Europe's debt crisis started in Greece, the eurozone only registers very meager growth, with seven member countries still in recession —Spain, Italy, Greece, Cyprus, Portugal, Slovenia, and Finland — according to Eurostat.

Government debt across the entire 27-nation EU totaled 85.1 percent at the end of September, compared with 85 percent in June, according to Eurostat. The European debt levels compare to about 110 percent in the United States, 88 percent in Canada, or 240 percent in Japan, according to IMF data.

"Compared to the U.S. or Japan, Europe's average debt level looks excellent," Weil said. "But the eurozone is not one entity guaranteeing all of its member states' debt. The problem is the unequal distribution, with some countries like Greece or Portugal having an unsustainably high debt burden," he added.

The highest increases of the quarterly debt level were indeed recorded in the countries worst-hit by the crisis: Ireland's rose by 5.9 percentage points to 117 percent, in Portugal it was up by 3 percentage points to 120 percent. Greece, which is in sixth year of a severe recession, recorded an increase of 3.4 percentage points to 153 percent, the eurozone's highest debt ratio.

"Once growth returns the eurozone's debt ratio will decrease, although we don't expect that to happen before 2015-2016," Kater said.

Echoing the trend of stabilization in Europe's debt levels, rating agency Fitch revised its outlook on Belgium from negative to stable Wednesday, citing the government's success in trimming its budget deficit as planned.

Comment on this story

Belgium's public debt level has now peaked at about 100 percent and will start dwindling to 79 percent by 2021, the agency added.

Germany has been the main reason why the eurozone as a whole has not fallen into recession — technically defined as two quarters of negative growth in a row — but Europe's biggest economy is showing signs of slowing down as the debt crisis takes its toll on the country's exports.

Its economy shrank slightly in the final quarter of 2012 and the government this month lowered this year's growth forecast to a meager 0.4 percent.