Officials from EU have borrowed heavily to pull the 16-nation zone out of its first recession, and debt levels are set to smash a huge hole in the ceiling set by the European Union in its Stability and Growth Pact.
Soaring budget deficits, low growth and public debt that could reach 84 percent of GDP (gross domestic product) by 2010, an increase of 18 percentage points from 2007," are far above the pact's limit of 60 percent. The Fitch agency has urged all governments with top ratings to tame debt, mentioning in particular Britain, which is not a eurozone member, along with France and Spain, which are. Germany, long considered the cornerstone of eurozone fiscal discipline, forecasts public debt at around 78 percent of GDP this year, while in France, the second biggest eurozone economy, public debt jumped to a record 75.8 percent in the third quarter of 2009. Greece says its shortfall come to 120 percent of output in 2010.
Debt is raising the cost of borrowing for many countries and adding to the weight of reimbursing obligations on future budgets. With unemployment rising and weak growth expected in 2010, officials cannot count on increased tax revenues for much help in paying down debt, a lot of which is owed abroad. Finances will be undermined further by an ageing population that will need expensive health care in the years to come.
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