EU limit on national debt v GDP

Penisland

Hi,
Does anyone know what the EU limit on national debt v GDP is as a percentage?

Thanks a lot

Scofflaw

Penisland wrote: »

Hi,
Does anyone know what the EU limit on national debt v GDP is as a percentage?

Thanks a lot

3% of GDP, if memory serves.

cordially,
Scofflaw

Penisland

Scofflaw wrote: »

3% of GDP, if memory serves.

cordially,
Scofflaw

Ye I came across that myself but I am fairly sure that is for national borrowing per year v GDP and not for the total national debt.

Thanks anyway!!!!!!

Scofflaw

Penisland wrote: »

Ye I came across that myself but I am fairly sure that is for national borrowing per year v GDP and not for the total national debt.

Thanks anyway!!!!!!

Ah, beg pardon, yes, 3% is the current deficit figure - the total national debt limit is 60% of GDP.

cordially,
Scofflaw

Penisland

Scofflaw wrote: »

Ah, beg pardon, yes, that's the current deficit figure - the total national debt limit is 60% of GDP.

cordially,
Scofflaw

Brilliant! Thanks a lot. Any chance you have a link to where you find that information, as I need the figure for an assignment and therefore need to reference it!

Thanks again

Scofflaw

Penisland wrote: »

Brilliant! Thanks a lot. Any chance you have a link to where you find that information, as I need the figure for an assignment and therefore need to reference it!

Thanks again

Its from Protocol 12 of the Treaty on the Functioning of the European Union:

The reference values referred to in Article 126(2) of the Treaty on the Functioning of the European Union are: - 3 % for the ratio of the planned or actual government deficit to gross domestic product at market prices; - 60 % for the ratio of government debt to gross domestic product at market prices.

This is Article 126 of the TFEU:

Article 126 (ex Article 104 TEC)

1. Member States shall avoid excessive government deficits.

2. The Commission shall monitor the development of the budgetary situation and of the stock of government debt in the Member States with a view to identifying gross errors. In particular it shall examine compliance with budgetary discipline on the basis of the following two criteria:

(a) whether the ratio of the planned or actual government deficit to gross domestic product exceeds a reference value, unless: - either the ratio has declined substantially and continuously and reached a level that comes close to the reference value, - or, alternatively, the excess over the reference value is only exceptional and temporary and the ratio remains close to the reference value;

(b) whether the ratio of government debt to gross domestic product exceeds a reference value, unless the ratio is sufficiently diminishing and approaching the reference value at a satisfactory pace. The reference values are specified in the Protocol on the excessive deficit procedure annexed to the Treaties.

So you can reference that as being Protocol 12 and Article 126 of the Treaty on the Functioning of the European Union.

cordially,
Scofflaw

Penisland

Scofflaw wrote: »

Its from Protocol 12 of the Treaty on the Functioning of the European Union:



This is Article 126 of the TFEU:



So you can reference that as being Protocol 12 and Article 126 of the Treaty on the Functioning of the European Union.

cordially,
Scofflaw

Thanks a million, thats perfect!

DidierMc

Why in god's name did we agree to this? This essentially forbids a stimulus package to boost our economy

astrofool

DidierMc wrote: »

Why in god's name did we agree to this? This essentially forbids a stimulus package to boost our economy

To stop the Euro being worth zilch and moving back to bartering spuds and cows.

McCruiskeen

DidierMc wrote: »

Why in god's name did we agree to this? This essentially forbids a stimulus package to boost our economy

I think it is more an aspiration then a legal imperative.

Most countries have breached this limit as you can see from the following.


At the end of 2009, the lowest ratios of government debt to GDP were recorded in Estonia (7.2%), Luxembourg (14.5%), Bulgaria (14.8%), Romania (23.7%), Lithuania (29.3%) and the Czech Republic (35.4%). Twelve Member States had government debt ratios higher than 60% of GDP in 2009: Italy (115.8%), Greece (115.1%), Belgium (96.7%), Hungary (78.3%), France (77.6%), Portugal (76.8%), Germany (73.2%), Malta (69.1%), the United Kingdom (68.1%), Austria (66.5%), Ireland (64.0%) and the Netherlands (60.9%).

Interestingly at the end of 2009 Ireland owed less debt per person than Germany. It is the current spending deficit that will very quickly balloon this however.

Flamed Diving

DidierMc wrote: »

Why in god's name did we agree to this? This essentially forbids a stimulus package to boost our economy

Because, in small countries, with a fixed exchange rate, there would be no check against continual fiscal expansion. In large countries, fiscal expansion ends up affecting the interest rate and/or the exchange rate, which acts as a buffer.