Government finance statistics


Data extracted on 21 April 2021.

Planned article update: 21 October 2021.

Highlights


The EU’s government deficit-to-GDP ratio increased from -0.5 % in 2019 to -6.9 % in 2020, the highest in the time series.

In the EU, the government debt-to-GDP ratio increased from 77.5 % at the end of 2019 to 90.7 % at the end of 2020, the highest in the time series.

At the end of 2020, the government debt-to-GDP ratio ranged from 18.2 % in Estonia to 205.6 % in Greece.

General government debt, 2019 and 2020
(general government consolidated gross debt, % of GDP)
Source: Eurostat (gov_10dd_edpt1)

This article examines how key government finance statistics have developed in the European Union (EU) and the euro area (EA). Specifically, it considers general government deficits, gross debt, total revenue and total expenditure, as well as taxes and social contributions, which are the main sources of government revenue.

Full article


Introduction

Government finance statistics contain crucial indicators for determining the health of the economies of the EU 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.

In 2020, the government deficit (net borrowing of the consolidated general government sector, as a share of GDP) of both the EU and the euro area (EA) increased sharply to the highest deficit recorded in the time series. Increases in the general government debt-to-GDP ratios of both areas exceeded the very sharp increases of the deficit, resulting in a record high level.

General government surplus/deficit

The EU’s government deficit-to-GDP ratio increased from -0.5 % in 2019 to -6.9 % in 2020, while this ratio increased in the euro area from -0.6 % to -7.2 %. Both increases are the result of the measures undertaken in response to the COVID-19 pandemic. The economic down-turn caused by the virus, as evidenced by a drop in nominal GDP (-4.7 % in the EU and -5.1 % for the Euro area), as well as the expenditure measures to contain the economic and social impact of the COVID-19 pandemic had a strong impact on the deficit and debt ratios.

In 2020, all EU Member States reported a deficit. The highest deficits were recorded in Spain (-11.0%), Malta (-10.1%), Greece (-9.7%), Italy (-9.5%), Belgium (-9.4%), France and Romania (both -9.2%), Austria (-8.9%), Slovenia (-8.4%), Hungary (- 8.1%), Croatia and Lithuania (both -7.4%) and Poland (-7.0%). All Member States, except Denmark (-1.1%), had deficits higher than 3% of GDP.

Figure 1: Public balance, 2019 and 2020
(% of GDP)
Source: Eurostat (gov_10dd_edpt1)


The general government balance (in relation to GDP) decreased in 2020 compared with 2019 in all the EU Member States. The largest decrease was noted in Greece (-10.9 percentage points), Malta (-10.5 percentage points), Austria (-9.5 percentage points), Slovenia (-8.8 percentage points) and Spain (-8.1 percentage points). The lowest decreases were noted in Sweden (-3.7 percentage points), Latvia (-4.0 percentage points), Finland (-4.5 percentage points), Slovakia (-4.8 percentage points), Denmark and Romania (both -4.9 percentage points) as well as Estonia (-5.0 percentage points).

Table 1: Public balance and general government debt, 2017–2020
(% of GDP)
Source: Eurostat (gov_10dd_edpt1)


Government debt

In the EU, the government debt-to-GDP ratio increased from 77.5 % at the end of 2019 to 90.7 % at the end of 2020, while in the Euro area it increased from 83.9 % to 98.0 % (see Figure 2). Both areas saw the sharpest year on year increase in debt as well as the highest level recorded in the available time series.

A total of fourteen EU Member States reported a debt ratio above 60 % of GDP at the end of 2020: the highest of these was registered by Greece (205.6 %), followed by Italy (155.8 %), Portugal (133.6 %), Spain (120.0 %), Cyprus (118.2 %), France (115.7 %) and Belgium (114.1 %).

The lowest ratios of government debt-to-GDP were recorded in Estonia (18.2 %), Luxembourg (24.9 %), Bulgaria (25.0 %), Czechia (38.1 %), Sweden (39.9 %), Denmark (42.2 %) and Latvia (43.5 %).

Figure 2: General government debt, 2019 and 2020
(general government consolidated gross debt, % of GDP)
Source: Eurostat (gov_10dd_edpt1)


At the end of 2020, government debt-to-GDP ratios increased for all the EU Member States when compared with the end of 2019. The largest increases of debt-to-GDP ratios were observed in Greece (25.1 percentage points), Spain (24.5 percentage points), Cyprus (24.2 percentage points), Italy (21.2 percentage points) and France (18.1 percentage points). The smallest increases of debt-to-GDP ratios were observed in Ireland (2.2 percentage points), Luxembourg (2.8 percentage points) as well as Bulgaria and Sweden (both 4.8 percentage points).

At the level of the EU and euro area in 2020, the increase in the debt exceeded the deficit recorded. This was mainly due to acquisition of financial assets. For further information is available in Eurostat's note on the stock-flow adjustment, describing the relationship between the deficit and the change in debt.

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, total general government revenue in 2020 amounted to 46.5 % of GDP (increasing from 46.1 % in 2019), and expenditure amounted to 53.4 % of GDP (increasing from 46.6 % in 2019). In the Euro area, total general government expenditure amounted to 54.1 % of GDP in 2020 (increasing from 47.0 % in 2019) and total revenue amounted to 46.8 % of GDP (increasing from 46.4 % in 2019) — see Figure 3.

Figure 3: Development of total expenditure and total revenue, 2010–2020
(% of GDP)
Source: Eurostat (gov_10a_main)


The increases in 2020 of total expenditure as a percentage of GDP in both areas are a clear break of the downward trend since 2010 and reflect the expenditure measures put in place to combat the economic and social impact of the COVID-19 containment measures. In the period between 2010 and 2019, total expenditure as a percentage of GDP decreased by 3.9 percentage points in both areas. The increase of 2020 compared with 2019 is 6.8 percentage points in the EU and 7.1 percentage points in the Euro area.

In absolute terms, during the period from 2011 to 2018 in both the EU and the Euro area, general government total expenditure grew at slower pace than general government total revenue, thereby leading to a decrease in the deficit. This trend stopped in 2019, when expenditure grew faster than revenue in both the EU and the Euro area, resulting in an increase in the deficit. In 2020, total revenue decreased by 3.9 % in the EU and 4.2 % in the Euro area, while total expenditure increased by 9.2 % in the EU and 9.1 % in the Euro area.

Figure 4: Development of total expenditure and total revenue, 2010–2020
(billion EUR)
Source: Eurostat (gov_10a_main)


While EU general government expenditure increased overall by EUR 1 572 billion between 2010 and 2020, there was a EUR 1 302 billion increase in EU general government total revenue in the same period. However, between 2019 and 2020, EU government total expenditure increased by EUR 601 billion, while government revenue decreased by EUR 249 billion. The decrease in government total revenue, was both due to automatic stabiliser effects of tax revenue (meaning that in an economic downturn, tax revenue decreases even without activie policy measures) as well as due to active tax cutting measures in order to mitigate the economic downturn caused by the COVID-19 pandemic.

In the euro area, general government expenditure increased by EUR 1 278 billion between 2010 to 2020, while total revenue increased by EUR 1 056 billion. Between 2019 and 2020, euro area government total expenditure increased by EUR 510 billion, while government revenue decreased by EUR 235 billion (see Figure 4).

The level of general government expenditure and revenue varies considerably between the EU Member States (see Figure 5). In 2020, the EU Member States with the highest levels of combined government expenditure and revenue as a proportion of GDP (in excess of 100 %) were France, Greece, Belgium, Finland, Austria, Denmark, Italy, Croatia and Sweden; Norway also recorded a ratio in excess of 100 %. In 2020, three EU Member States (Ireland, Romania and Lithuania) reported relatively low combined ratios (less than 80 % of GDP).

Figure 5: Government revenue and expenditure, 2020
(% of GDP)
Source: Eurostat (gov_10a_main)


Across the EU, the main components of total general government revenue are taxes and net social contributions (see Figure 6). In 2020, taxes made up 57.4 % of total revenue in the EU and 55.9 % in the euro area, while net social contributions amounted to 31.7 % of total revenue in the EU and 33.5 % in the Euro area. 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 both in the EU and in the Euro area. Property income (mainly interest, dividends and rent) made up 1.6 % of total revenue in the EU and 1.5 % in the Euro area.

Figure 6: Composition of total revenue, 2020
(% of total revenue)
Source: Eurostat (gov_10a_main)


Looking at each reporting country, the relative importance of the different revenue categories varied widely. Taxes made up less than 50 % of government revenue in Slovakia, Romania, Slovenia, Czechia as well as Norway and was precisely 50 % in Germany in 2020. Taxes made up 88.7 % of general government total revenue in Denmark, 80.1 % in Sweden and 77.6 % in Iceland.

Net social contributions had the highest share of total revenue in 2020 in Slovenia (39.9 %), Czechia and Germany (both 38.9 %), Slovakia (38.0 %) and Romania (36.2 %) and the lowest shares of total revenue in Denmark (1.6 %) and Sweden (6.9 %) as well as in Iceland (7.6 %).

The highest share of property income was observed for Norway (20.9 %) (see Figure 7).

Figure 7: Main components of government revenue, 2020
(% of total revenue)
Source: Eurostat (gov_10a_main)


The largest proportion of EU government expenditure in 2020 concerned the redistribution of income in the form of social transfers in cash or in kind (see Figures 8 and 9).

Figure 8: Composition of total expenditure, 2020
(% of total expenditure)
Source: Eurostat (gov_10a_main)


Social transfers (social benefits and social transfers in kind — purchased market production) made up 45.6 % of total expenditure in the EU and 47.5 % in the euro area. Compensation of employees accounted for 20.5 % of government expenditure in the EU and 19.9 % in the Euro area. Intermediate consumption made up 11.4 % of total expenditure in the EU and 11.0 % of total expenditure in the Euro area. Property income paid — of which by far the largest part is made up of interest payments — accounted for 2.7 % of government expenditure in the EU and 2.8 % in the Euro area. Gross fixed capital formation (mainly investments in non-financial assets) accounted for 6.2 % of total expenditure in the EU and 5.7 % in the Euro area. Subsidies made up 5.2 % of total expenditure in the EU and 5.1 % of total expenditure in the euro area. The share of subsidies in total expenditure increased significantly in 2020 due to labour market support measures as well as other measures to mitigate the economic impact of the COVID-19 pandemic containment measures.

Figure 9: Main components of government expenditure, 2020
(% of total expenditure)
Source: Eurostat (gov_10a_main)


The highest share of social transfers in total expenditure was observed in Germany (53.1 %), while the lowest shares were observed in Malta (22.5 %) and Hungary (24.7 %) as well as in Iceland (20.0 %). The share of subsidies in total expenditure was highest in Malta (10.8 % of GDP), followed by the Netherlands (10.3 % of GDP). In 2020, property income paid (including interest) reached a share of over 5 % of total expenditure for Italy (6.1 %), Portugal (5.9 %), Greece (4.9 %), Cyprus and Hungary (both 4.6 %) and Spain (4.3 %) as well as Iceland (8.1 %),

The main types of government revenue are taxes on production and imports, current taxes on income and wealth, etc., and net social contributions. For the EU, taxes on production and imports amounted to an equivalent of 13.3 % of GDP in 2020, current taxes on income, wealth, etc. to 13.1 % of GDP, and net social contributions to 14.7 % of GDP. Relative to GDP, the revenue from taxes on production and imports grew over the period 2010–2014 in the EU, its share relative to GDP rising by 0.6 percentage points (see Figure 10). Between 2014 and 2019, taxes on production and imports remained stable as a ratio to GDP and decreased by 0.2 percentage points in 2020. Current taxes on income and wealth, increased steadily from 11.7 % of GDP in 2010 to 13.1 % of GDP in 2020. Net social contributions remained comparatively stable as a ratio to GDP - ranging between 14.1 % and 14.4 % of GDP between 2010 and 2019, only to increase in 2020 to 14.7 % of GDP. One of the reasons for the 2020 increase in net social contributions revenues is that many of the labour market support schemes and other social measures in the Member States ensured a continued coverage of the contributions.

In 2020 compared with 2019, in 2020, social contributions increased, while current taxes on income and wealth remained rather stable as a percentage of GDP, while taxes on production and imports decreased. Current taxes on income and wealth are dominated by personal income taxes, which remained relatively stable in comparison with corporate income taxes. Typically, in an economic downturn, corporate profits are more quickly affected than employment. Furthermore, in 2020, many active labour market support measures were in place.

Figure 10: Main categories of taxes and social contributions, EU, 2010–2020
(% of GDP)
Source: Eurostat (gov_10a_main)


There was considerable variation in the structure of tax revenue across the EU Member States in 2020 (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 2020, the highest revenue to GDP ratio from the main categories of taxes and social contributions was 47.5% of GDP recorded in France, followed by 47.4 % recorded in Denmark. The proportion of GDP accounted for by such revenue was below 30 % in two Member States (Ireland with 21.1 % and Romania with 27.1 %).

Figure 11: Main categories of taxes and social contributions, 2020
(% of GDP)
Source: Eurostat (gov_10a_main)


Source data for tables and graphs

Data sources

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 finance statistics within the framework of the transmission programme which results in the submission of national accounts data. The main aggregates 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. Quarterly non-financial and financial accounts as well as quarterly general government gross debt are provided four times a year.

The data presented in this article correspond to some of the main indicators 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), 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, unrequited payments levied periodically by general government on the income and wealth of enterprises and households;
  • taxes on production and imports, including all compulsory, unrequited 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).

Context

The global financial and economic crisis of 2007-2008 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.

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Government finance statistics (EDP and ESA2010) (t_gov_gfs10)


Government finance statistics (EDP and ESA2010) (gov_gfs10)
Government contingent liabilities and potential obligations (gov_cl)