Government Debt

Published date01 December 2010
Date01 December 2010
AuthorDanny Dorling,Benjamin Hennig
Subject MatterIn Focus
The British government, elected in May 2010, set
about cutting the country’s budget deficit with an
enthusiasm that shocked many commentators.
Britain is not the only European Union member
state with a government debt problem but the
size of its deficit is much greater than in more
equitable European nations.
In the first map opposite, forecasts for gross do-
mestic product figures for 2010 have been used to
resize the countries of the European Union. The
lower map uses exactly the same shading as the
upper map, but this time the size of each country
is proportional to the size of their budget deficit.
The deficit is the net difference between borrow-
ing and lending in the consolidated general govern-
ment sector. At first sight the lower map appears
very similar to the upper map. That is because richer
countries have been able to borrow more than
poorer countries, while rich countries also have
higher GDP. By 2009 all the countries of Europe
were net debtors except for Norway. (Norway is not
a member of the EU so is missing from the map but
for comparison it had a 9.7 per cent net surplus in
2009, falling rapidly from 19.1 per cent in 2008.)
The map is colour coded by how large that gen-
eral government deficit as recorded in 2009 was
as a proportion of GDP at that time. The countries
coloured the darkest shade of red on both maps
already had deficits of over 10 per cent by 2009.
These were Ireland (14.3 per cent), Greece (13.6
per cent), the United Kingdom (11.5 per cent) and
Spain (11.2 per cent). Three of these stripped areas
on both maps are members of the single European
currency. This leaves the United Kingdom as the
most heavily indebted non-eurozone nation.
The UK’s exposed position caused extreme
nervousness among political elites in early 2010,
with an even higher proportionate debt than crisis-
ridden non-euro European nations such as Iceland
(9.1 per cent), Latvia (9.0 per cent), Lithuania (8.9
per cent) and Romania (8.3 per cent). When the
Con–Lib coalition was formed this deficit was cited
as a key reason why civil servants were rushing
the political parties to form a new government and
possibly pushing them away from one that would
include Labour, in case ‘the markets’ reacted badly,
there was a run on the pound or the ‘credit rating’
of the UK plummeted.
The budget deficit is far greater in the UK than in
more equitable European nations such as Austria
(3.4 per cent), Germany (3.3 per cent), Denmark
(2.7 per cent), Finland (2.2 per cent) and Sweden
(0.5 per cent). These countries were not as reli-
ant on the banking sector or a handful of other
industries; they also have less income inequality
and hence much smaller levels of personal debt.
Government Debt
In Focus
In Focus was complied by Danny Dorling and Benjamin Hennig, University of Sheeld.
Data source: Eurostat.
European Union members mapped by forecasts for gross domestic product
European Union members mapped by size of budget decit
The UK does have one factor in its favour which
is not shown by these maps. Its government debt
tends to be in the form of long term loans and so
does not need to be repaid quickly, unlike in many
of the other troubled economies of Europe. How-
ever, the Coalition announced, on 20 October, that
they intended to make cuts totalling £81billion to
pay the debt back as quickly as possible. Cuts of
this size have never been achieved before in the
UK in such a short time.

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