Government finance statistics
- Data extracted on 22 October/22 November 2015. Most recent data: Further Eurostat information, Main tables and Database. Planned article update: May 2016.
This article examines how key government finance indicators have developed in the European Union (EU) and the euro area. Specifically, it considers public (general government) deficits, general government gross debt, the revenue and expenditure of general government, as well as taxes and social contributions, which are the main sources of government revenue.
These statistics are crucial indicators for determining the health of the economies of the EU's Member States. Under the terms of the EU’s Stability and Growth Pact (SGP), Member States pledged to keep their deficits and debt below certain limits: a Member State’s government deficit may not exceed -3 % of its gross domestic product (GDP), while its debt may not exceed 60 % of GDP. If a Member State does not respect these limits, the so-called excessive deficit procedure (EDP) is triggered. This entails several steps — including the possibility of sanctions — to encourage the Member State concerned to take appropriate measures to rectify the situation. The same deficit and debt limits are also criteria for economic and monetary union (EMU) and hence for joining the euro. Furthermore, the latest revision of the integrated economic and employment guidelines (revised as part of the Europe 2020 strategy for smart, sustainable and inclusive growth) includes a guideline to ensure the quality and the sustainability of public finances.
- 1 Main statistical findings
- 2 Data sources and availability
- 3 Context
- 4 See also
- 5 Further Eurostat information
- 6 External links
Main statistical findings
In 2014, the government deficit (net borrowing of the consolidated general government sector, as a share of GDP) of both the EU-28 and the euro area (EA-19) decreased compared with 2013, while general government debt increased (both relative to GDP and in absolute terms).
In the EU-28 the government deficit-to-GDP ratio decreased from -3.3 % in 2013 to -3.0 % in 2014 and in the EA-19 it decreased from -3.0 % to -2.6 %. Four EU Member States — Denmark, Luxembourg, Estonia and Germany — registered government surpluses in 2014. There were 10 EU Member States, namely the Lithuania, Romania, Latvia, Sweden, the Czech Republic, Malta, the Netherlands, Hungary, Austria and Slovakia, which recorded deficits in 2014 that were lower than -3.0 % of GDP (see Figure 1).
Italy registered a deficit of -3.0 % of GDP in 2014. Deficit ratios in 2014 were greater than -3.0 % of GDP in 13 EU Member States: the largest government deficits (as a percentage of GDP) were recorded by Cyprus (-8.9 %), Portugal (-7.2 %), Spain (-5.9 %), Bulgaria (-5.8 %), the United Kingdom (-5.7 %), Croatia (-5.6 %) and Slovenia (-5.0 %). Among the 13 Member States with deficit ratios exceeding -3.0 % of GDP, 10 had also reported deficits exceeding -3.0 % for each of the three previous years, therefore for the whole reporting period shown in Table 1.
General government deficits (in relation to GDP) decreased in 2014 compared with 2013 in nine EU Member States. Three of the Member States — the Netherlands, Hungary and the United Kingdom — recorded the same deficits in 2014 as in 2013. Denmark, Germany and Estonia moved from a deficit in 2013 to a surplus in 2014. Luxembourg recorded a higher surplus in 2014 than in 2013. The 12 remaining Member States each recorded larger deficits in 2014 than in 2013.
In the EU-28 the government debt-to-GDP ratio increased from 85.5 % at the end of 2013 to 86.8 % at the end of 2014, and in the EA-19 from 91.1 % to 92.1 %. A total of 16 EU Member States reported a debt ratio above 60 % of GDP in 2014. At the end of 2014, the lowest ratios of government debt-to-GDP were recorded in Estonia (10.4 %), Luxembourg (23.0 %) and Bulgaria (27.0 %) — see Figure 2.
In 2014, government debt-to-GDP ratios increased for 20 EU Member States when compared with 2013, while this ratio decreased for eight Member States, most notably for Ireland (-12.5 percentage points of GDP) and Poland (-5.5 percentage points of GDP), as well as for the Czech Republic, Germany, Malta, Slovakia, Hungary and Luxembourg. The highest increases of debt-to-GDP ratios from 2013 to 2014 were observed in Slovenia (10.0 percentage points) and Bulgaria (9.0 percentage points).
Government revenue and expenditure
The importance of the general government sector in the economy may be measured in terms of total general government revenue and expenditure as a percentage of GDP. In the EU-28, total government revenue in 2014 amounted to 45.2 % of GDP (down from 45.3 % in 2013), and expenditure amounted to 48.2 % of GDP (down from 48.6 % in 2013). In the EA-19, total general government expenditure amounted to 49.4 % of GDP in 2014 (down from 49.6 % in 2013) and total revenue to 46.8 % of GDP (up from 46.6 % in 2013) — see Figure 3.
EU-28 and EA-19 total expenditure as a percentage of GDP decreased between 2004 and 2007 and then grew sharply between 2007 and 2009 to reach 50.3 % of GDP in the EU-28 in 2009 and 50.7 % of GDP in the EA-19. Total expenditure in both areas then decreased between 2009 and 2011, increased in 2012 and decreased slowly through to 2014.
In absolute terms, general government total expenditure grew at a slow pace over the period from 2004 to 2014 in both the EU-28 and the EA-19 (except for a slight decrease in the EA-19 between 2010 and 2011; see Figure 4). Revenues grew at a more steady pace throughout the period from 2009 to 2014, thereby leading to a decrease in the deficit. However, between 2008 and 2009, general government revenues fell in both areas.
While EU-28 general government expenditure increased overall by EUR 565 billion between 2009 and 2014, there was a EUR 966 billion increase in EU-28 general government revenue. Similarly in the EA-19, general government expenditure increased by EUR 285 billion during the same period, while revenue increased by EUR 605 billion.
The level of general government expenditure and revenue varies considerably between the EU Member States (see Figure 5). In 2014, the Member States with the highest levels of combined government expenditure and revenue as a proportion of GDP (in excess of 100 %) were Denmark, Finland, France, Belgium, Austria and Sweden; Norway also recorded a ratio in excess of 100 %. Six of the Member States — Romania, Lithuania, Ireland, Latvia, Estonia and Bulgaria — reported relatively low combined ratios (less than 80 % of GDP), as did Switzerland among the EFTA countries.
Across the EU-28, the main components of total general government revenue are taxes and net social contributions (see Figure 6). In 2014, taxes made up 58.7 % of total revenue in the EU-28 and 55.3 % in the EA-19, while net social contributions amounted to 29.7 % of total revenue in the EU-28 and 33.2 % in the EA-19. Market output, output for own final use and payments for non-market production ('sales/fees' and own account capital formation) made up 7.0 % of total revenue in both the EU-28 and EA-19. Property income (mainly interest, dividends and rent) made up 2.2 % of total revenue in the EU-28 and 2.1 % in the EA-19.
Looking at each EU Member State, the relative importance of the different revenue categories varied widely. For example, taxes made up less than 50 % of government revenue in Slovakia, the Czech Republic, Lithuania and Slovenia in 2014, but 86.9 % of general government total revenue in Denmark and 79.5 % in Sweden (see Figure 7).
The largest proportion of EU-28 government expenditure in 2014 concerned the redistribution of income in the form of social transfers in cash or in kind (see Figures 8 and 9). Social transfers (social benefits and social transfers in kind — purchased market production) made up 43.4 % of total expenditure in the EU-28 and 46.8 % in the EA-19. Compensation of employees accounted for 21.5 % of government expenditure in the EU-28 and 20.9 % in the EA-19. Intermediate consumption made up 13.5 % of total expenditure in the EU-28 and 10.8 % of total expenditure in the EA-19. Property income paid — of which by far the largest part is made up of interest payments — accounted for 5.3 % of government expenditure in the EU-28 and 5.4 % in the EA-19. Gross fixed capital formation (mainly investment) accounted for 6.0 % of total expenditure in the EU-28 and 5.5 % in the EA-19.
The main types of government revenue are current taxes on income and wealth, etc., taxes on production and imports, and net social contributions, with capital taxes amounting to just 0.3 % of the EU-28’s GDP in 2014. For the EU-28, taxes on production and imports amounted to an equivalent of 13.5 % of GDP in 2014, current taxes on income, wealth, etc. to 12.8 % of GDP, and net social contributions to 13.4 % of GDP. Relative to GDP, the revenue from these three tax categories grew over the period 2010–13 in the EU-28, with the increase in current taxes on income, wealth, etc. having been strongest (see Figure 10). However, during the economic and financial crisis, the decrease had also been strongest in this category. From 2013 to 2014, taxes on production and imports increased by 0.2 percentage points of GDP, while current taxes on income, wealth, etc. and net social contributions remained almost unchanged relative to GDP.
There was considerable variation in the structure of tax revenues across the EU Member States in 2014 (see Figure 11). As may be expected, those Member States that reported relatively high levels of expenditure tended to be those that also raised more taxes (as a proportion of GDP) for general government. For example, in 2014, the highest revenue to GDP ratio from the main categories of taxes and social contributions was 51.6 % recorded in Denmark, with France and Belgium recording the next highest shares (47.6 % and 46.3 % respectively). The proportion of GDP accounted for by such revenue was below 30 % in four of the Member States (Bulgaria, Romania, Lithuania and Latvia) as well as Switzerland.
Data sources and availability
Under the terms of the excessive deficit procedure, EU Member States are required to provide the European Commission with their government deficit and debt statistics before 1 April and 1 October of each year. In addition, Eurostat collects more detailed data on government finances within the framework of the transmission programme which results in the submission of national accounts data. The main aggregates collected for general government are provided to Eurostat twice a year, whereas statistics on the functions of government (COFOG) should be transmitted within one year after the end of the reference period and detailed tax and social contribution receipts within nine months after the end of the reference period.
The data presented in this article correspond to the main revenue and expenditure items of the general government sector, which are compiled on a national accounts (ESA 2010) basis. The difference between total revenue and total expenditure — including capital expenditure (in particular, gross fixed capital formation) — equals net lending/net borrowing of general government, which is also one balancing item of the government non-financial accounts.
Delineation of general government
The general government sector consists of institutional units which are non-market producers whose output is intended for individual and collective consumption, and are financed by compulsory payments made by units belonging to other sectors, and institutional units principally engaged in the redistribution of national income and wealth (ESA 2010 §2.111). The general government sector is subdivided into four subsectors: central government, state government (where applicable), local government, and social security funds (where applicable).
Definition of main indicators
The public balance is defined as general government net borrowing/net lending reported for the excessive deficit procedure and is expressed in relation to GDP. According to the protocol on the excessive deficit procedure, government debt is the gross liabilities in currency and deposits, debt securities, and loans outstanding at the end of the year of the general government sector measured at nominal (face) value and consolidated.
The main revenue of general government consists of taxes, social contributions, sales and property income. It is defined in ESA 2010 by reference to a list of categories: market output, output for own final use, payments for non-market output, taxes on production and imports, other subsidies on production, property income, current taxes on income, wealth, etc., net social contributions, other current transfers and capital transfers.
The main expenditure items consist of the compensation of (government) employees, social benefits (social benefits and social transfers in kind for market production purchased by general government and NPISHs), interest on the public debt, subsidies, and gross fixed capital formation. Total general government expenditure is defined in ESA 2010 by reference to a list of categories: intermediate consumption, gross capital formation, compensation of employees, other taxes on production, subsidies, property income, current taxes on income, wealth, etc., social benefits other than social transfers in kind, social transfers in kind - purchased market production, other current transfers, adjustments for the change in pension entitlements, capital transfers, and transactions in non-produced assets.
General government data reported for main aggregates of general government in the ESA 2010 framework must be consolidated for certain national accounts transactions, meaning that specific transactions between institutional units within the general government sector — property income, other current transfers and capital transfers — are eliminated or cancelled out. For these transactions, subsector data should be consolidated within each subsector but not between subsectors. Thus, data at the sector level should equal the sum of the subsector data, except for the items covering property income, other current transfers and capital transfers, which are consolidated. For these latter items, and consequently total revenue and total expenditure, the sum of the subsectors should exceed the value of the sector.
Taxes and social contributions correspond to revenues which are levied (in cash or in kind) by central, state and local governments, and social security funds. These levies (generally referred to as taxes) are organised into three main areas, covered by the following headings:
- taxes on income and wealth, etc. including all compulsory payments levied periodically by general government on the income and wealth of enterprises and households;
- taxes on production and imports, including all compulsory payments levied by general government with respect to the production and importation of goods and services, the employment of labour, the ownership or use of land, buildings or other assets used in production;
- net social contributions, including all employers’ and households’ actual social contributions, imputed social contributions that represent the counterpart to social benefits paid directly by employers, as well as two additional imputed items (households’ social contribution supplements and social insurance scheme services charges).
The financial and economic crisis resulted in serious challenges being posed to many European governments. The main concerns were linked to the ability of national administrations to be able to service their debt repayments, take the necessary action to ensure that their public spending was brought under control, while at the same time trying to promote economic growth.
The disciplines of the Stability and Growth Pact (SGP) are intended to keep economic developments in the EU, and the euro area countries in particular, broadly synchronised. Furthermore, the SGP is intended to prevent EU Member States from taking policy measures which would unduly benefit their own economies at the expense of others. There are two key principles to the SGP: namely, that the deficit (planned or actual) must not exceed -3 % of GDP and that the debt-to-GDP ratio should not be more than (or should be falling towards) 60 %. The SGP was substantially reinforced in 2011, as was EU economic governance in general.
Each year, EU Member States provide the European Commission with detailed information on their economic policies and the state of their public finances. Euro area countries provide this information in the context of the stability programmes, while other Member States do so in the form of convergence programmes. The European Commission assesses whether the policies are in line with agreed economic, social and environmental objectives and may choose to issue a warning if it believes a deficit is becoming abnormally high. This action can lead to the Council finding the existence of an excessive deficit, which requires a deadline to be set for its correction.
- Government expenditure by function — online publication
- Government finance statistics - quarterly data
- Integrated government finance statistics presentation
- Structure of government debt
- Tax revenue statistics
Further Eurostat information
- Measuring net government debt: theory and practice — 2014 edition
- Taxation trends in the European Union — data for the EU Member States, Iceland and Norway — 2015 edition
- Government finance statistics (EDP and ESA2010) (t_gov_gfs10)
- Government statistics - historical ESA95 data (t_gov_h)
- Government finance statistics (EDP and ESA2010) (gov_gfs10)
- Government statistics - historical ESA95 data (gov_h)
- Government contingent liabilities and potential obligations (gov_cl)
Methodology / Metadata
- Government deficit and debt (ESMS metadata file — gov_10dd_esms)
- Government revenue, expenditure and main aggregates (ESMS metadata file — gov_10a_main_esms)
- Main national accounts tax aggregates (ESMS metadata file — gov_10a_taxag)
- General government expenditure by function (COFOG) (ESMS metadata file — gov_10a_exp_esms)
- Quarterly financial accounts for general government (ESMS metadata file — gov_10q_ggfa_esms)
- Quarterly government debt (ESMS metadata file — gov_10q_ggdebt_esms)
- Quarterly non-financial accounts for general government (ESMS metadata file — gov_10q_ggnfa_esms)
Source data for tables and figures (MS Excel)
- Manual on government deficit and debt — implementation of ESA 2010 — 2014 edition
- Manual on compilation of taxes and social payments on a quarterly basis — first edition
- Manual on quarterly non-financial accounts for general government — 2011 edition
- Manual on sources and methods for the compilation of COFOG statistics — Classifications of the Functions of Government — 2011 edition