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If the EU were one country, it would be breaking its own budget rules

New Eurostat figures show the EU as a whole ran a budget deficit of 4.7pc of its GDP – €180 billion above its limit.

Image: Geert Vanden Wijngaert/AP

NEW EU FIGURES show that if the 27-member European Union was treated as a single country, its government spending for 2011 would be well in breach of its own limits for budget deficits.

Figures produced by the EU’s statistics body Eurostat showed that the government deficits of each of the 27 member states, when aggregated together, stood at almost €561 billion for the 2011 calendar year.

Although the EU’s GDP – the total value of all goods and services produced within it – stood at €12.65 trillion, a new record, the budget deficit was the equivalent of 4.4 per cent of the GDP.

This is well clear of the 3 per cent limit imposed by the EU on its member states; any countries that go beyond this are required to enter an ‘excessive deficit procedure’ where they commit to measures which would bring them back under the limit.

The €561 billion deficit, in fact, is a full €180 billion above that limit of 3 per cent.

The over-run is slightly lessened if only the 17 Eurozone member states are included: their aggregated deficit, of €391 billion, is 4.1 per cent of their total GDP which stands at just over €9.4 trillion.

17 of the 27 member states exceeded the 3 per cent limit last year, of which Ireland’s – at 13.4 per cent – was the highest. This, however, can be revised down to 8.4 per cent because the deficit includes the cost of saving the banks, which Eurostat allows to be excluded.

The next worst countries were Greece and Spain, where the deficit stood at 9.4 per cent of GDP. Then follows the UK, where the deficit stood at 7.8 per cent.

Only three of the 27 EU member states ran budget surpluses last year: Hungary (4.3 per cent of GDP), Estonia (1.1 per cent) and Sweden (0.4 per cent).

The total Eurozone as a whole carries debts equivalent to 87.3 per cent of its GDP, again significantly higher than the 60 per cent limit defined in the Fiscal Compact ratified by each Eurozone country earlier this year. 14 of the 27 members exceed the 60 per cent limit.

Ireland’s ratio – at 106.4 per cent of GDP – is the fourth-highest of any EU member; the only states higher are Greece (170.6 per cent of GDP), Italy (120.7 per cent) and Portugal (108.1 per cent).

Rules laid down in EU treaties forbid the European Union’s own institutions from running at a deficit, and require the institutions simply to scale back their spending if they are set to exceed the amounts they receive under the EU’s seven-year Budgets.

The current budget expires at the end of 2013 – and negotiations on its successor are likely to be wrapped up during Ireland’s term as the head of the Council of the EU, the body made up of ministers from each member state.

Read: French president Hollande: Ireland’s bailout is ‘a special case’

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About the author:

Gavan Reilly

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