European countries pursuing toughest austerity see limited benefit as growth still lacking
LONDON — The austerity pain pursued by a number of European countries has led to very little gain.
The 2012 figures from Eurostat, the European Union’s statistics office, showed Monday that many of the countries hit hardest by Europe’s financial crisis, such as Portugal and Spain, saw their budget deficits rise — even though they have pursued the strict austerity policies prescribed by international creditors to cut debt.
Though the cumulative level of government deficits fell during the year, it was largely thanks to Germany swinging into a budget surplus. Others countries continue to reel from the impact that austerity is having on their economies. The region’s debt level actually rose as the eurozone sank back into recession and tax income from companies and households fell.
Overall in the eurozone, the deficit dropped in 2012 to around 353 billion euros ($460 billion) from 391 billion the year before, with Germany posting a dramatic improvement that saw it swing into a surplus.
As a result, the budget deficit of the whole eurozone fell to 3.7 percent of the region’s annual gross domestic product. Countries in the EU are supposed to keep deficits at or below 3 percent. Overall borrowing in the eurozone is nevertheless lower than in the U.S., which has a budget deficit of around 7 percent of annual GDP.
In 2012, eurozone debt was worth 90.6 percent of the region’s GDP, up from 87.3 percent the year before.
Here’s a look at the performance of some of the eurozone countries during 2012:
GREECE — The country at the epicenter of the region’s debt crisis saw mixed results in 2012. Though the government managed to reduce its annual borrowing to 19.4 billion euros from 19.8 billion the year before, the deficit swelled to 10 percent of GDP from 9.5 percent, largely because of a deepening recession. Even so, the country is winning plaudits for its progress — in 2009, Greece’s annual borrowing stood at over 36 billion euros. When not counting the cost of paying interest on its existing debt, the government hopes to post a surplus over the coming year. Public debt fell in 2012 to 156.9 percent of GDP from 170.3 percent, partly because private holders of Greek bonds agreed to a big writedown.
IRELAND — The second euro country to receive a bailout is widely viewed as the poster child of austerity and its performance in 2012 showed further improvements. As well as reducing annual borrowing to 12.5 billion euros from 21.3 billion, Ireland saw its deficit shrink to 7.6 percent of GDP against 13.4 percent the year before. Unlike fellow bailout recipients, Ireland has managed to return to tepid economic growth for most of the past three years and is ahead of its target for pruning the budget deficit to 3 percent of GDP by 2015. As a further sign of its reputational rebound, Ireland has resumed limited auctions of long-term bonds at a relatively low cost. As a result, it is confident of exiting its bailout program later this year.
PORTUGAL — In spite of winning praise from its international creditors, Portugal’s deficit swelled to 6.4 percent of GDP from 4.4 percent the year before. However, the 2011 figure was flattered by the transfer of private banks’ pension funds to the Treasury, which temporarily improved the balance sheet of public finances. In 2012, the government’s plan to use 3.1 billion euros from the privatization of airport management company ANA to lower its deficit fell foul of Eurostat, which didn’t allow the inclusion of that revenue in the deficit calculation.