EU Government finance statistics: deficit-debt relation

The financial accounts of general government cover transactions in financial assets and liabilities as well as the stock of financial assets and liabilities.

The net lending(+) / net borrowing (-) (also known as surplus/deficit) together with the gross debt of the general government are among the most important indicators in government finance statistics.

While in general, government gross debt will increase in the presence of a government deficit, this is not necessarily the case in the short term. Deficits can also be financed by the sale of financial assets, or alternatively, debt can be used to finance the acquisition of financial assets. Therefore, in addition to the surplus/deficit, a strong co-movement of net acquisition of financial assets exists with the evolution of quarterly debt. The incurrence of liabilities not covered in the Maastricht debt definition as stipulated in the excessive deficit procedure (mainly ‘other accounts, payable’), as well as valuation differences and discrepancies, play a smaller role in explaining the change in debt.


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.


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 (-4.4 % in the EU and -4.9 % 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 Member States reported a deficit. The highest deficits were recorded in Spain (-11.0%), Greece (-10.1%), Malta (-9.7%), Italy (-9.6%), Romania (-9.4%), France and Belgium (both -9.1%), Austria (-8.3%), Hungary (-8.0%), Slovenia (-7.7%), Croatia (-7.4%), Lithuania (-7.2%) and Poland (-7.1%). All Member States, except Denmark (-0.2%) and Sweden (-2.8%), had deficits higher than 3% of GDP.