Define Austerity: Spanish, Italian And Greek Debt/GDP Rise To Record Highs

Tyler Durden's picture

Ask any European why their standard of living is so atrocious (after years of freeflowing debt-funded largesse) and the answer is well-known: austerity.

Also ask any European if austerity means public debt should go up or down and the answer is also as clear: down.

Which is why most Europeans will likely be confused to very confused when presented with the latest Eurostat data according to which not only did Eurozone debt rose remain just shy of all time record highs and certainly increasing from a year ago, but those PIIGS nations which are the first to blame austerity for everything, such as Greece (net of the debt wiped out as part of its 2012 bankruptcy of course), Portugal, Spain and Italy, all saw their public debt hit all time highs.

Total Eurozone debt closed 2013 at a level of 92.6%, just shy of its all time high and up from 90.7% a year ago, 87.4% two years ago, and so on.

Where did the bulk of the debt growth in the quarter come from? The usual suspects: Greece, Slovenia and Croatia.

Compared with the third quarter of 2013, twelve Member States registered an increase in their debt to GDP ratio at the end of the fourth quarter of 2013, fourteen a decrease and two remained stable. The highest increases in the ratio were recorded in Slovenia (+9.2 percentage points - pp), Croatia (+5.2 pp) and Greece (+3.0 pp), and the largest decreases in Luxembourg (-4.6 pp), Belgium (-3.6 pp), Malta (-3.2 pp) and Austria (-2.9 pp).

Finally, the complete breakdown by nation. It is here that perhaps one has the biggest issues with the definition of austerity because it is quite clear that for all the screaming and yelling, Greek, Italian, Spanish and Portuguese debt and debt/GDP all rose across the board.

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Peter Pan's picture

One nation's record Debt to GDP record is another nations bad debt to GDP record.

wallstreetaposteriori's picture

record debt to GDP and record 5-10yr low interest rates....  correlations are inversed...  its true, the shittier you are in life the more you are rewarded.

Peter Pan's picture

It's funny how things get to a stage where regardless of whether you are the debtor or the creditor, the outcome is still the same......disaster.

Peter Pan's picture

And to think that the above table does not take into account unfunded liabilities and unpaid bills for goods and services which governments owe but do not pay.

Peter Pan's picture

And what is missing from the table is the amount of amount of family jewellery and heirlooms that are sold by privatization by various debtors to keep the debt from exploding even further.

fonzannoon's picture

until proven otherwise, in the current environment debt does not matter. Bond yields in Spain and Italy are almost down to the U.S 10yr and Japan's bond yields are a fraction of all of these.

NoDebt's picture

Spanish 5-year trading right on top of the 5 year UST (~1.70).  

Maybe the rest of the world knows we just do a better job under-reporting our inflation.

Singelguy's picture

As I have stated many times before, the European definition of austerity has been raising taxes and slowing the rate of growth of government spending. Consumers have less disposable income and the debt continues to grow albeit at a slower pace. It is no surprise that debt has reached record levels. The key question is, how long can it continue?

Peter Pan's picture

Thanks for contributing. I was starting to think that my fellow bloggers had all been rounded up by some alphabet agency.

Peter Pan's picture

Where have I been?

Hide and seek in Afghanistan, home improvement shows in Syria, selling ski masks in the Ukraine, crowd control in China, plastic surgery on Snowden in Russia, counting tortoises on Bundy's ranch, raising billions for Obama's proposed library in the USA, sweeping up gold dust in Fort Knox, missionary work in Guantanamo Bay, collecting rent from the Israeli government for rent on the land on which their parliament is built, and in my spare time laughing every time these Mother F....ers push gold down further until even the poor can afford to buy some.

Peter Pan's picture

Where is the Ukraine?

Oh, I forgot. If there is no government how can there be government debt?

Ghordius's picture

actually it's more because Ukraine is not a member of EuroStat

jubber's picture

How the fuck can 10y Italy be 3.077% and ATL, and 10y Spain 3.040% It has to be the biggest ponzi scheme out there...

while 30y US 3.493%  this cannot end well.

Peter Pan's picture

This is because Draghi will pay or so the creditors think.

Bernoulli's picture

Classical Ponzi Scheme, just in a GIGA format!

- The amount of actual government debt doesn't matter --> We got used to the high number, it's just fictional on the balance sheets and doesn't ever have to be repaid and will be roled over forever

- The rates will be kept "low" by Draghi's super-promise --> So that the debt to GDP of the PIIGS and Germany and France doesn't go beyond 200% in the next years, otherwise maybe people would actually get suspicious (maybe)...

- Creditors (mostly banks?) still profit massively for now --> Even Germany will be paying 30 billion EUR in 2014 in interest on its 2 trillion government debt mostly to banks; add to that the interest on the 5 trillions of debt of Italy, France and Spain combined and you'll easily end up with a total stash of 150 billion EUR interest; that's yearly net profit for the creditors

and on top of that:

- Government bonds are officially totally liquid risk-free assets according to Basel III --> here's to the healthy eurozone banks balance sheets!

However, what will happen if "investors" will want their money back (not only the interest?)? Total collapse of the system. I don't think we are far away from that moment... and the "ordinary people" in Germany, Brussels and the EU think all is fine. Crazy. It's like with the ferry in South Korea, only worse: "Sinking? No no.. don't worry, we have your back. No need to put on life vests, don't be scared! Go back to the dance floor and enjoy the party!"

bubblemania's picture

EU QE is just around the corner, well planned and coordinated as FED sunsets their program. This will be another windfall to equities before the shtf.

bubblemania's picture

Because citizens throughout the western world demand higher prices!!!

Devotional's picture

over here in Portugal the government is chanting an "economic miracle" recovery. In summary, the level of bullshit and lies has now gone into full retard mode. Thing is, a lot of people are buying it - true story!!!

Zwelgje's picture

When you still have a job/income you can afford the bullshit.

When you haven't one can only see it for what it is: bullshit.

UselessEater's picture

how to peacefully conquer many nations at once

just tolerate the odd inconvenient riot whereby the uselesseaters damage their own properties and businesses

salivate over the profitable contagion affects

AdvancingTime's picture

Blaming austerity for the blow-back from governments living beyond its means is more then unfair, we should at all times conduct business and run our government  with responsible reigns on spending. If a government spends and runs its business in an austere way the issue of when to start cutting or tightening should never surface. More on the bum rap placed on austerity in the following article.

TBT or not TBT's picture

Also, Greek Italian and Spanish young adults slowed down forming families some several decades ago, and made few kids when they did. So these countries are dying out. Good luck with their bonds as long term investments.

intric8's picture

greece has one chance and one only. They need a very strong leader, loyal to greeks, and they need to engineer an economic miracle similar to what hitler accomplished in germany from 1933 going forward. Minus all the bad things he did. Greece is in a game they cant win. We all are, all of us who are beholden central banks.

TBT or not TBT's picture

They have no "youth". Take a look at the distribution of Greeks by age. They stopped reproducing themselves about a decade before Italy and Spain did. There will be no vigorous resurgence any time soon, even if they sequester every breeding female in stirrups hopped up on fertility drugs, they'd be starting from a shrunken base. And you have to educate and employ the new humans effectively too. And that's not happening, on top of your needing about three decades to see a big effect. These three nations are toast.

Ghordius's picture

so what? "Total Eurozone debt closed 2013 at a level of 92.6%, just shy of its all time high and up from 90.7% a year ago, 87.4% two years ago, and so on."

yes. it's a strategy of containment, not strangulation. and you know what? up to now it's working. remember that it was the US subprime Crisis that caused all the shockwaves which made all this more necessary than before

meanwhile all this resulted in all eurozone countries (and a few more) to sign the European Fiscal Compact

and this fiscal compact is the key reason for the current state of eurozone sovereign bonds

intric8's picture

then tell me then ghordo, cause i respect your opinion. You know well that pushing austerity on a nation thats half unemployed is a delusional idea that will cause even further unemployment and less spending. Why doesnt greece just cram down the debt? Mark assets to market, and mark liabilities down accordingly. Wipe out the bondholders (even going forward if necessary) and equity investors who didn’t do them homework rather than bail them out. What can’t be paid off won’t be paid off, and the costs should NOT be socialized. That country needs to turn around the old fashioned way. explain if you would how current measures will turn things around, if you dont mind.

Ghordius's picture

your question strikes directly at the heart of the conflict between NeoKeynesianism, Keynesianism and the Austrian School. no way I can answer in a blog comment without you telling me which methods you believe more likely to work

assets? the most important "assets" for Greece are it's tax-paying citizens and it's private economy

debt? most of this debt is on the books of the euro nations that bailed out Greece. think about how they would react if Greece would default immediately. on the other side, most of this debt is only interest-bearing from 2017 on

ThirdWorldDude's picture

EFC is the reason for the current state of European bonds...?!? WTF, Ghordo, do you really believe that load of horsecrap that you just wrote?

EFC's principles are a broader take of the Maastricht criteria that EU members were obliged to live up to in order to be able to switch to the euro. We all know how "strict" Brussels has been holding to the fulfillment of those criteria. As ZH et al. have reported om numerous occasions, it's only 2-3 EU18 member states that have lived up to said rules.

Zerozen's picture

Another thing...ahem...the US subprime mess didn't cause a global recession. The world was awash in debt, a powder keg waiting for a spark. The subprime meltdown just happened to be the thing that was the spark. If it wasn't subprime, it would have been something else.

intric8's picture

I'm beginning to think ghordo is a plant. Hes too clever to be able to believe some of the nonsense he panders. Though this, ghordo- "its working!" - re: austerity in greece, well if you succeed in netting a catch with that, i'd check it for scales

Ghordius's picture

so you respect my opinion (other comment of yours) and you are beginning to think I'm a plant pandering nonsense

TBT or not TBT's picture

When you put that way, yes, even more so, now.

Ghordius's picture

oh, well, this is ZH, I'll take it as a double compliment

meanwhile, another Ghordian statement: Greece is back in the financial markets

after staying out since 2010, it sells again Greek Sovereign debt. would you have believed it, years ago?

my account is 2 years and 47 weeks old, always "flying" the EUR symbol, btw. and I write on ZH what I think

(well, part of it, with some attention to verifiable facts, if possible)

intric8's picture

Theres risk appetite everywhere ghordo, even in greek debt- buyer beware. The success of that bond sale is no indication of the health of the greek economy, we know that, n furthermore it seems like bs posturing to me, being that the entire ecu hinges on greece

Ghordius's picture

yes, the world was and still is awash with debt. meanwhile, not all debt is created equal, and not all debt is deemed equal

Ghordius's picture

yes, Maastricht was all about intentions. only a hurdle for EUR accession .the new fiscal compact is a full detailed treaty, which means it's... the law

not that it's going to work smoothly, yet it's way more than Maastricht. counterquestion: does your country have anything similar?

time will tell

ThirdWorldDude's picture

"Maastricht was all about intentions...

Sure, intentions that were built in a European Treaty that was then ratified by each and every one of the EU members and as you know all too well a Treaty which is superior to domestic law because EU member-states have ceded a slight portion of their sovereignty to Brussels supranationalists. 

TBT or not TBT's picture

Well ghordo, why did so many big financial institutions buy the subprime infected MBS in such huge quantities to begin with? Simple. They didn't have enough viable investments of sufficient size and return IN EUROPE to make their pensions and insurance companies make good on promises. Because Europe is sclerotic as hell, with horrible demographics. They have assets but no upcoming generation to lend to. So they lent into the Fed and Dem political machine's preposterous housing bubble. THEREBY MAKING THE BUBBLE GO BIGGER LONGER. Ie you have it backwards. Severe problems in Europe, which persist and worsen in open view of everyone, fueled the very financial crisis you are trying to blame Europe's difficulties on.

Ghordius's picture

yes, european demographics aren't anything to write home about

I'm not sure what you mean by "They have assets but no upcoming generation to lend to"


dpr10's picture

Another example is UK where debt to GDP has risen by 1ppt at Q413. Despite record tax revenues and out of this word real estate prices,annual budget deficit was nearly the same as last year if you exclude the 4.2bn pound sale from its Lloyds stake:) and he will have a balanced budget in five years haha..

q99x2's picture

Increase the taxes in Italy to pay for my FAFSA.

Joe A's picture

They only thing the MSM in Europe tells you is that recovery in the Eurozone is happening. Of course, never mind the costs in debt. Because that will be on the plate of future Europeans.

TBT or not TBT's picture

Aaaaaand there won't be a lot of future europeans. Demography is a bitch, in Europe.

Stimulati's picture

Basic Keynes predicts that if you try to implement austerity during an aggregate demand shortfall you will end up with higher debt due to more economic slowdown.  This is exactly what Krugman predicted would happen.

Zerozen's picture

Well then I guess those Europeans had better get started on breaking some windows!

TBT or not TBT's picture

Hayek predicts that central planning causes epic disasters, and that is what happened, and the central planners doubled down. And here we are. Step to a scale of decades and look at Europe. It's Wylie Coyote running in the air over the chasm. You've got no kids fuckheads! Because central planning. Statism.