The financial accounts of general government cover transactions in financial assets and liabilities as well as the stock of financial assets and liabilities. This news items focusses on consolidated loans of the EU-28 government sector.
Besides borrowing, governments can also lend money and thereby increase their balance sheet by holding loan assets. There are several reasons for governments to provide credit to other units via a loan. For example, during the financial crisis starting in 2008, governments provided loans to financial institutions in distress.
At that time, the capital markets were not easily accessible by these financial institutions. This is one of the main reasons for the increase in loans held by government for the period from the fourth quarter of 2008 to the fourth quarter of 2013. Another reason is that some public financial institutions were wound up and the remaining assets and liabilities became part of the general government sector. The repayment of such loans (or reduction in balance sheets) resulted in a decrease from the first quarter of 2015 onwards.Another reason for the decrease in consolidated loan assets is the fact that government units now tend to lend more to each other instead of lending to other institutional sectors. Such loans between government units are not shown in the consolidated figures.
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The data source is here.
Loans can either be short-term, where the original maturity does not exceed one year, or long-term and are valued at nominal value irrespective of whether they are performing or non-performing. At the end of the third quarter of 2019, the 28 EU governments held EUR 886 billion of loans.
For more information on quarterly government finance statistics, please take a look at the latest Statistics Explained article on this topic, accessible here.
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