Euro Area Deficit Falls to Eight-Year Low as Growth Accelerates

  • European authorities seek to prop up discipline after slippage
  • Spain, Portugal face landmark fine over deficit miss in 2015

Budget deficits for the 19 euro-area governments fell to an eight-year low in the first quarter as the pace of economic growth accelerated.

The euro area’s seasonally-adjusted budgetary shortfall fell to 1.6 percent of output compared with 2.2 percent in the same period a year ago, the European Union’s statistics agency said in a release published Friday. That is the narrowest shortfall since the first quarter of 2008.

European authorities are trying to restore their reputation for budget discipline after the financial crisis saw the deficit for the bloc reach 7 percent in 2010. Spain and Portugal have become a test case for the European Commission, which will discuss next week whether to make them the first member states to be fined for missing their deficit reduction goals.

Under European Union rules, nations are supposed to keep their debt ratios below 60 percent of output and limit deficits to 3 percent. The Spanish shortfall came in at 5.1 percent last year compared with a target of 4.2 percent, while Portugal ended the year at 4.4 percent -- also above the agreed limit.

Total government debt in the euro area fell to 91.7 percent in the first quarter compared to the same period a year ago, when it stood at 93 percent of output, Eurostat said in a separate report. Breaking down the numbers, 14 governments saw a decline in their debt levels, led by Ireland and the Netherlands, while 13 saw an increase. Greece tops the list of nations with the highest debt, at 176 percent of output, followed by Italy and Portugal.

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