In 2007, the government deficit of both the euro area (EA15) and the EU27 fell compared with 2006, while the government debt increased in absolute terms. In the euro area the government deficit decreased from 1.3% of GDP in 2006 to 0.6% in 2007, and in the EU27 it fell from 1.4% to 0.9%. In the euro area the government debt to GDP ratio fell from 68.5% at the end of 2006 to 66.3% at the end of 2007, and in the EU27 from 61.3% to 58.7%.

In 2007 the largest government deficits in percentage of GDP were recorded by Hungary (-5.0%), Greece (-3.5%), the United Kingdom (-2.8%), France (-2.7%), Portugal (-2.6%) and Romania (-2.6%). Twelve Member States registered a government surplus in 2007: Finland (+5.3%), Denmark (+4.9%), Sweden (+3.6%), Cyprus (+3.5%), Luxembourg (+3.2%), Estonia (+2.7%), Spain (+2.2%), Slovenia (+0.5%), Netherlands (+0.3%), Ireland (+0.2%), Bulgaria (+0.1%) and Latvia (+0.1%). In all, 16 Member States recorded an improved government balance relative to GDP in 2007 compared with 2006, and 11 a worsening, Malta stood at -1.8%.

At the end of 2007, the lowest ratios of government debt to GDP were recorded in Estonia (3.5%), Luxembourg (7.0%), Latvia (9.5%) and Romania (12.9%). Eight Member States had government debt ratios higher than 60% of GDP in 2007: Italy (104.1%), Greece (94.8%), Belgium (83.9%), Hungary (65.8%), Germany (65.1%), France (63.9%), Portugal (63.6%) and Malta (62.2%).

In 2007, government expenditure in the euro area was equivalent to 46.1% of GDP, and government revenue to 45.5%. The figures for the EU27 were 45.8% and 45.0% respectively. In both zones, the government expenditure ratio decreased between 2006 and 2007, while the government revenue ratio increased slightly.

Reservations on reported data

Greece: Eurostat has withdrawn the reservation on the data reported by Greece in the April 2008 notification (News Release 54/2008 of 18 April 2008 on the provision of data for the excessive deficit procedure). Issues clarified since April 2008 concern the recording of EU grants (in 2006 and 2007), statistical discrepancies (for 2007 data) and the coverage of source data for extra-budgetary funds, local government and social security funds. The Greek authorities have agreed with Eurostat a list of medium-term actions to be implemented.

United Kingdom: In 2007 the Bank of England made a loan of GBP 26.93 bn (1.9% of GDP) to Northern Rock Bank in the context of a rescue operation. Eurostat has taken the provisional view that the Bank of England lending to Northern Rock should have government as the principal party of the transaction in the national account framework. If the loan were to be treated in this way, the debt to GDP ratio would be 46.1% at end 2007 and 44.9% at end 2007/2008. The issue will be the object of further discussion with the Office for National Statistics (ONS). The lending to Northern Rock Bank has no direct impact on the UK government deficit for 2007.

Amendment by Eurostat to reported data

United Kingdom: Eurostat has amended the deficit data notified by the United Kingdom for years 2004 to 2007 for consistency of recording of UMTS licences proceeds in 2000. This leads to an increase in the government deficit in 2004, 2005 and 2007 (as well as for financial year 2004/2005, 2005/2006 and 2007/2008) by GBP 1044 mn (0.1% of GDP) and in 2006 (financial year 2006/2007) by GBP 1045 mn (0.1% of GDP). There is no change in the reported debt figures.

Other issues

Governments have implemented or announced a number of measures in support of financial stability. As far as 2008 is concerned, Eurostat is examining the statistical treatment of these bank rescue operations to ensure a consistent approach.

Background

In this News Release Eurostat, the Statistical Office of the European Communities, is providing7 government deficit and debt data based on figures reported in the second 2008 notification by EU Member States for the years 2004-2007, for the application of the excessive deficit procedure (EDP). This notification is based on the ESA95 system of national accounts. This News Release also includes data on government expenditure and revenue and an annex with the main revisions since the April 2008 News Release. Eurostat will also be releasing information on the underlying government sector accounts, as well as on the contribution of deficit/surplus and other relevant factors to the variation in the debt level (stock-flow adjustment), on the government finance statistics section on its website: http://epp.eurostat.ec.europa.eu/pls/portal/url/page/PGP_DS_GFS/PGE_DS_GFS_0

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