Euro debt burden stuck at 90% of GDP

Ireland's government debt levels rose to 117% in the third quarter of 2012

Ireland's government debt levels rose by 5.9 percentage points to 117% in the third quarter of last year, new figures show. 

The Government has said in the Budget that the debt to GDP ratio would be 118% in 2012 and would peak at 121% next year. 

Overall, the euro area failed to reduce its overall government debt in the third quarter of last year.

This was despite efforts by several states to improve their finances by cutting spending and raising taxes.

Total government debt for the euro zone, relative to its annual economic output, was barely changed at 90% of gross domestic product in the third quarter of 2012. 

This compared with 89.9% for three months earlier, the EU's statistics office Eurostat said. It was up from 86.8% of GDP a year earlier. 

Government debt across the entire 27-nation EU totalled 85.1% at the end of September, compared with 85% in June, Eurostat said.

The European debt levels compare to about 110% in the US, 88% in Canada, or 240% in Japan, according to data from the International Monetary Fund.

Over three years after Europe's debt crisis started, the euro zone only registers very meagre growth, and seven countries are still in recession - Spain, Italy, Greece, Cyprus, Portugal, Slovenia, and Finland - according to Eurostat.

This makes it difficult for those countries to get debt levels under control despite pushing through harsh spending cuts and reforms because shrinking output makes the value of a country's debt as a proportion of the size of its economy worse.

Consequently, the highest increases of the quarterly debt level were recorded in the countries worst-hit by the crisis: Ireland's rose by 5.9 percentage points to 117%, in Portugal it was up by 3 percentage points to 120%. Greece, which is in sixth year of a severe recession, recorded an increase of 3.4 percentage points to 153%, the euro zone's highest debt ratio.

Greece, Ireland and Portugal received tens of billions of euros in rescue loans from their European partners and the International Monetary Fund after their debt reached such a high level that made it impossible for them to borrow fresh funds at reasonable rates on financial markets.

Germany has been the main reason why the euro zone as a whole has not fallen into recession - technically defined as two quarters of negative growth in a row - but Europe's biggest economy is showing signs of slowing down as the debt crisis takes its toll on the country's exports.

Its economy shrank slightly in the final quarter of 2012 and the government this month lowered this year's growth forecast to a meagre 0.4%.

"One has to be prepared that the debt level will rise further," said one Commerzbank analyst. "Several economies are in recession and growth is slow in others, so the peak debt level won't be reached before this or next year," he added.