Budget_Deficit_and_Public_Debt_to_GDP_in_2012_(for_selected_EU_Members).png


Summary

Description
English: The Debt-to-GDP ratio and Budget deficit to GDP ratio have been plotted for all eurozone countries and UK in 2012. The same plot can also be found here with 2009 figures . The figures indicate the fiscal health of the countries in the plot. Generally, the farther up and to the right a country goes, the higher the risk for investors. The following 4 areas have been given a background color in the plot to reflect the level of fiscal health:
  • Yellow (60-120% debt-to-GDP if the deficit is below 3%, OR 0-60% debt-to-GDP with a 3-6% deficit), maps the area considered to be unhealthy on the long term. All countries belonging to the area will comply with 1 out of 2 SGP limits and be close to comply with both SGP limits, which mean that the situation is not yet at a "critical" state.
  • Orange (min.120% debt-to-GDP if the deficit is below 3%, OR 60-120% debt-to-GDP if the deficit is above 3%, OR 0-60% debt-to-GDP if the deficit is above 6%), covers the three areas commonly referred to as critical levels .
  • Red (if the debt-to-GDP exceeds 120% in combination with having a deficit above 3%). In this area, the situation (according to IMF guidelines) is considered to be "unsustainable" . As a general rule of thumb, it is only possible for a country to enter a path of continuously declining debt-to-GDP ratios if it succeeds to achieve budget deficits below 3% of GDP; and IMF have argued this for an average-country will not be possible (without external help) if the debt suddenly exceeds the 120% limit.
Trend over time is important to map. In example, a critical deficit (bigger than 6%) in a single year might occur only because of special temporary one-off circumstances, and if forecasts promise it will by-it-self return to more normal levels in subsequent years (while the debt level also still remain below 120%), then it will in such a situation not be evaluated as being truly critical (despite of having a critical size for a specific year).
Date
Source Own work . Data for the chart is from the Eurostat database [1] [2] , which normally will be identical with the European Commision's AMECO database [3] [4] . In the current version of the file, the figures are based on recorded data for the first 3 quarters and forecasted data for the last 4th quarter of 2012. The data can also be found published by the European Commission's latest Autumn Economic Forecast 2012 report .
Author Danish Expert
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25 November 2012

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