European Affairs

Austerity Measures in the EU - - A Country by Country Table     Print

According to the European Union’s Maastricht criteria, EU member states may not have a budget deficit that exceeds three percent of their Gross Domestic Product (GDP) or a national debt that exceeds of sixty percent of the GDP.  Listed below are the EU states’ 2009 government budget deficits as percentages of GDP, their official predicted future government budget deficit as a percent of GDP.  Also listed is the national debt as a percentage of GDP for 2009.

 

 

 

Government Budget Deficit as Percentage of GDP for 2009

Predicted Government Budget Deficit as Percentage of GDP

National Debt as Percentage of GDP for 2009

Austria

3.5%

2011- 3%

66.5%

Belgium

6%

 

96.7%

Bulgaria

4.7%

2011- 2.5%

14.8%

Cyprus

6%

 

56.2%

Czech Republic

5.8%

2011- 4.6%

2012- 3.5%

2013- 2.9%

35.3%

Denmark

2.7%

 

41.6%

Estonia

1.7%

 

7.2%

Finland

2.5%

 

44.0%

France

7.5%

2011- 6%

2013- 3%

2014- 2%

77.6%

Germany

3%

 

73.2%

Greece

13.6

2010- 7.8%

2011- 7%

115.1%

Hungary

4.4%

2011- 3.8%

78.3%

Ireland

14.4%

2014- 3%

2015- 2.9%

64.0%

Italy

5.3%

2012- 2.7%

115.8%

Latvia

10.2%

2011- 6%

36.1%

Lithuania

9.2%

 

29.3%

Luxemburg

0.7%

 

14.5%

Malta

3.8%

 

69.1%

Netherlands

5.4%

 

60.9%

Poland

7.2%

 

51.0%

Portugal

9.3%

2010- 7.3%

2011- 4.6%

76.8%

Romania

8.6%

 

23.7%

Slovakia

7.9%

2011- 4.9%

2013- 3%

35.7%

Slovenia

5.8%

 

35.9%

Spain

11.1%

2011- 6%

53.2%

Sweden

0.9%

 

43.2%

United Kingdom

11.4%

2015- 1%

68.1%

 

Austria- The Austrian government announced the country would hit its target three percent of GDP for its budget deficit in 2011 (a year earlier than anticipated). Austria’s austerity plan includes an expected income of €1.17 billion ($1.63 billion) from tax increases--a banking tax that will bring in €500 million in 2011, extra taxes on tobacco, petrol, and flight tickets that will bring in approximately €667 million in 2011. The remainder of the government’s plan includes an expected €1.6 billion in spending cuts. Both the tax increase and spending cuts will allow for a €400 million new investment project aimed at education, research and energy efficient projects.

Belgium- Stalemate in domestic politics after deadlocked elections has paralyzed action on austerity measures. When a new government is formed, it will find proposals on the table for new taxes: on pensions, on CO2 emissions, a “crisis tax” on banks – plus a proposal to bar increases in health-care spending.

Bulgaria- Austerity measures aimed at lowering its budget deficit to 4.8 percent of GDP in 2009 to 2.5 percent for 2011. The plan includes reducing spending by $584 million in 2011 by cutting funds to almost all government ministries; a reducing public sector jobs by 10 percent and a freezing wages for up to three years.

Cyprus- Deficit reduction steps include increasing fuel taxes and corporate taxes by one percent.  Freezes are being put on public-sector recruitment and parts of the telecommunications budget. A rise in VAT rates is under discussion.

Czech Republic- The national budget for 2011 aims to reduce the budget deficit to 4.6 percent of the GDP, 3.5 percent in 2012 and to 2.9 percent in 2013. State spending will be cut by 10 percent mostly through welfare and wage cuts (salary cuts of up to 43 percent). Taxes will be applied to pensions of workers who earn three times the national average wage. More reforms to pension and healthcare are expected to be announced in December.

Denmark- Government will cut spending by $4 billion over the next three years to lower budget deficit to below three percent of GDP. Spending cuts include unemployment benefits lowered to two years (from four); the public sector will lose 20,000 jobs; child benefits are to be reduced by five percent, ministerial salaries cut by five percent and university expenses will be cut.

Estonia- With comparatively low levels of debt (7.2 percent of GDP) and only a 1.7 percent budget deficit, savings of €432 million are being sought and an increase in VAT rates is under consideration.

Finland- An energy tax will generate €750 million in a deficit reduction move; new excise taxes on sweets and soft drinks will raise an extra €100 million per year; VAT rates are being raised one percent (to 23 percent), but the restaurant VAT rate will be reduced to 13 percent.

France- The government’s budget is aimed at lowering the deficit to six percent of GDP in 2011, three percent in 2013 and to two percent in 2014. Parliament voted to raise the retirement age to 62 (from 60); the pay-as-you-go pension system is being raised by half a year to 41.5 years of required work for full pension; a three-year freeze on public spending is under consideration; pension contributions from employees’ pay will rise to 10.55 percent from 7.85 percent; income taxes for the highest income group will rise by one percent and an one-off corporate tax break will be eliminated. Under these plans, a total of €45 billion a year will be cut from government spending over the next three years.

Germany- The budget, before parliament by end of November, will cut the budget deficit by €80 billion, three percent of GDP by 2014. The government will cut welfare spending by €30 billion over a four year period; reduce public sector payrolls by up to 15,000 by 2014 and raise new taxes on nuclear power plant operators and air travel. Defense cuts include reducing armed services by 40,000 troops in an effort to cut military spending by €9.3 billion.

Greece- The Greek budget aims for a deficit of seven percent of GDP in 2011, down from a projected 7.8 percent in 2010. Proposed plans will cut the budget by €30 billion over the next three years. Public sector wages were cut by up to 25 percent; lower-wage workers’ bonuses will have a cap and higher- paid workers’ bonuses will be eliminated and many temporary workers’ contracts will not be renewed. The Greek government is expected to crack down on tax evasion and on corruption within the tax service. Tax revenue will include a VAT increase of four percent that is expected to bring in €1 billion, a 10 percent increase on fuel, alcohol and tobacco taxes and new property and gambling taxes. The average retirement age is set to rise from 61.4 to 63.5 along with other expected pension cuts.

Hungary- Hungary’s budget aims for a deficit of 3.8 percent of GDP for 2011.  The government’s plans include a 200 billion forint (€735 million) (about 0.7 percent of GDP) tax levy on the financial sector for both 2010 and 2011; a 15 percent cut in public sector expenditure (saving €171 million); lower wage ceilings for public sector employees (and the elimination of the 13th month payment); a 15 percent cut in budget subsidies for political parties in 2010 and reductions of seats in parliament and local assemblies are possibilities.  Additionally, measures implemented by the previous government in 2009, include a gradual three-year increase in the retirement age to 65; a two-year freeze in public sector pensions; a temporary increase to 25 percent in VAT rates; cuts in the “jubilee” bonuses for the prime minister, ministers and state secretaries and a 10 percent cut in sick pay and suspension of a housing subsidy.

Ireland- Ireland announced it will need to make twice the budget reductions originally announced in order bring the deficit to three percent of GDP by 2014. The announcement included that the government will cut the budget deficit by €6 billion in 2011. Previous austerity measures included a five percent cut in public sector wages; capital gains and capital acquisitions taxes increase by 25 percent; social welfare cut by €760 million and child benefits reduction by €16 per month; a cigarette tax increase; investment projects reduction by €960 million; a carbon tax of €15 per ton of CO2 and a new water tax. The increased expenditure cuts and tax increases will be announced December 7th.

Italy- Italy’s budget aims to bring down the deficit from 5.3 percent of GDP to 2.7 percent by 2012. Spending cuts include a delay in retirement age of up to six months; a state salary freeze and pay cuts for high public sector earners. Funding to city and regional authorities is expected to be cut by more than €13 billion. All government ministries will be required to make a 10 percent spending cut in 2011.

Latvia- Latvia’s budget plans for a six percent deficit of GDP by stimulating economic growth and tax increases. The government will also make spending cuts totaling 800 million lats ($1.5 billion) over 2011-2012. Real estate taxes are expected to rise and a VAT increase on products and services to 18 percent from 10 percent. Public sector wages will be cut by 25 percent.

Lithuania- Lithuania’s austerity measures include a two year freeze in public sector salaries; public spending will decrease by 30 percent; public-sector pensions will be cut by 11 percent; alcohol and pharmaceuticals will be taxed at higher rates; corporate taxes will rise by five percent and parental-leave benefits will decrease. Also, pension reforms are expected to be announced next year.

Luxembourg- Government spending will be reduced by €370 million in 2011 and €407 million in 2012, including cuts in transportation and education spending.

Malta- In 2009, Malta ran a deficit of 3.8 percent of GDP so officials do not believe that austerity measures are necessary: instead, they are concentrating on increasing the creation of jobs.

Netherlands- The Netherlands’ austerity plan aims to cut the budget by €18 billion by 2015. Likely measures will include higher retirement age, reduction in military spending, tax increases and cuts in government programs.

Poland- The government plans to cut €14.4 billion over the next two years. The budget includes a one percent VAT increase, tightening pension requirements (but not raising the retirement age) and proposed military cuts.

Portugal- Portugal’s budget will lower 2009’s deficit of 9.3 percent of GDP to 4.6 percent in 2011. Spending reductions include a five percent cut to top earners in the public sector; cuts to social programs; 17 enterprises will be privatized; VAT rates will rise and income and corporate taxes will rise by two to five percent. Military spending will be cut by 40 percent by 2013.

Romania-  Romania’s government will cut state wages by 25 percent and pensions will be cut by 15 percent; up to 70,000 public sector jobs could be lost in 2010 and the government will raise VAT rates to 24 percent (up five percent) to raise up to €1.2 billion.

Slovakia- Slovakia’s budget deficit will fall from of 7.8 percent of GDP to 4.9 percent in 2011 and to three percent in 2013.The government plans a 10 percent cut in minister and lawmaker salaries; a one percent VAT increase and higher taxes on alcohol and cigarettes.

Slovenia- Parliament has proposed reductions in public sector bonuses.  Inflation adjustments for wages will not be implemented.

Spain- Spain’s budget will lower 2009’s deficit of 11.2 of GDP to six percent in 2011. Deficit reductions include an income tax increase for those earning more than €175,000; wages cut by five percent for civil servants; 13,000 jobs will be eliminated; public investment plans will be cut by more than €6 billion; automatic inflation-adjustments for pensions will be suspended; a €2,747 baby bonus subsidy will be cut and regional funding will be cut by €1.2 billion.

Sweden- In the 1990’s Sweden implemented a fiscal rules-based system based on budgetary spending ceilings. Strong public finances and a sustainable debt level are likely to remain. No exceptional austerity measures are foreseen given the recent pick-up in economic activity and continued improvement in the fiscal balance.

United Kingdom-The British government unveiled the country’s steepest public spending cuts in more than 60 years: €83 billion in spending cuts by 2015, bringing the 11 percent of GDP budget deficit down to one percent over the next five years. The new budget includes reducing costs in government departments by an average of 19 percent; a 24 percent cut to the Department of Culture (includes the BBC); raising the retirement age from 65 to 66 by 2020; eliminating 490,000 public sector jobs over the next four years, university cuts; lowering long-term unemployment benefits from 95% to 70% and eliminating benefits to those who do not seek jobs; eliminating child benefits to those earning more than €70,000 as well as other cuts to the welfare system. Defense spending will decrease by eight percent and police spending will decrease by four percent. The VAT tax will rise from 17.5 to 20 percent in January.

By Jennifer Pietras, European Affairs Intern