The euro zone seems to be slowly emerging from the debt crisis. Indeed, the average of both deficits and debts to be reduced between 2015 and 2016 from 90.3% to 89.3% and from 2.1% to 1.5% respectively, according to figures published by Eurostat.
The situation of the different states is however very contrasted. Greece has the highest debt (179% of GDP) followed by Italy (132.6%), Portugal (130.4%) and Cyprus (107.8%). France saw its debt increase from 92.3% to 96% between 2013 and 2016. In contrast to Germany, which saw its share decline from 77.5% to 68.3% over the same period. In general, most countries still have a debt higher than the ratio set by the Maastricht Treaty. Only six euro zone countries have a debt below the 60% of GDP ratio. However, European debt is now in its second consecutive year of decline.
The evolution of deficits is more significant: most euro area countries have brought this ratio below the 3% targets. Eight of them even recorded a budget surplus, including Greece (0.7%). France has been able to gradually reduce its deficit since 2013 to reach 3.4% of GDP in 2016. Spain has the worst deficit at 4.5% of GDP. In total only four countries remain above this threshold.
This recovery in public accounts is the result of the accounting consolidation policies pursued until 2015. Public spending in the euro area fell on average from 48.5% to 47.7% of GDP between 2015 and 2016. Portugal has thus reduced its deficit from 4.4% of GDP in 2015 to 2% in 2016. The return to growth and the ECB’s actions have also contributed to the reduction of deficits. In 2016 the euro zone grew by 1.7%, higher than the United States (1.6%). In addition, the Court of Auditors estimates that 40% of the reduction in France’s public deficit is due to the fall in borrowing rates. But these have started to rise and are expected to continue to rise in 2018. For its part, the ECB should gradually reduce its support. Consequently, the question of the sustainability of the public debts of the most indebted States could well reappear according to Patrick Artus, Economist at Natixis.