France and Italy Shave Debt as Euro Nations Dawdle Over Reformsby
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France and Italy reduced government debt in the third quarter of 2015 as nations across the euro area struggled to keep within European spending limits while wrestling with threats to economic recovery.
The second- and third-largest economies in the 19-nation currency bloc saw their government-debt levels decrease in the third quarter from their euro-era records in the previous three months, Eurostat, the European Union’s statistics agency, said on Friday. France’s debt declined to 97 percent of gross domestic product, while Italy’s fell to 134.6 percent of GDP. Under European Union rules, nations are supposed to keep to a debt ratio below 60 percent.
The figures underscore the persisting weaknesses of the euro-area recovery as European Central Bank President Mario Draghi bemoaned “the sluggish pace” of economic reform.
“The swift and effective implementation of structural reforms, in an environment of accommodative monetary policy, will not only lead to higher sustainable economic growth in the euro area but will also raise expectations of permanently higher incomes and accelerate the beneficial effects of reforms, thereby making the euro area more resilient to global shocks,” the ECB president told reporters in Frankfurt on Thursday.
Government debt in the euro area as a whole decreased in the third quarter to 91.6 percent of GDP from 92.3 percent in the second quarter, Eurostat said in its report from Luxembourg. That is still higher than the 91.1 percent debt ratio at the same point two years ago.
Only Greece, the country that has been sending shockwaves around the euro area since 2010, has debt that’s higher than Italy in the euro area. The Greek debt mountain rose in the third quarter to 171 percent of GDP from 168.9 percent in the three previous months. Portugal’s debt also rose, to 130.5 percent of GDP in the third quarter, from 128.6 percent.
Italy’s debt levels are still “far away from what is admittable,” EU Economic Affairs Commissioner Pierre Moscovici said on Wednesday in a Bloomberg Television interview at the World Economic Forum in Davos, Switzerland. “Yes, the Italian government is making reforms --- that’s positive. Yes, it’s reducing deficits; it also can use flexibility, but overall, it is necessary that in Italy, too, the debt-to-GDP ratio diminishes,” he said.
Italian Prime Minister Matteo Renzi has committed to reduce Italy’s debt to 131.4 percent of GDP this year, which would be a first reduction in the annual debt ratio since 2007. The government said it will meet the goal through the sale of stakes in the railroads and air-traffic controller.
Thanks to economic reforms and less government spending, euro-area governments have managed to narrow their budget gaps. The bloc’s seasonally adjusted deficit narrowed in the third quarter to 1.8 percent of GDP from 2.2 percent in the previous three months, Eurostat said. It stood at 3 percent, the EU’s prescribed ceiling, two years previously.