Cyprus’ public debt significantly increases in 2012

PanARMENIAN.Net - Cyprus’ public debt showed a significant increase in 2012, according to data released by Eurostat.

Cyprus Mail reports that the government debt amounted in 2012 to €15.350bn or 85.8 per cent of GDP. In 2011 the public debt was €12.778bn or 71.1 per cent of GDP, making it the second largest annual increase in eurozone debt after that of Spain.

Most countries overshot the Maastricht public debt limit of 60 per cent of GDP last year, with Greece, Italy, Portugal and Ireland being the foremost culprits. Germany posted a debt ratio of 81.9 per cent.

Cyprus was also among 11 countries that failed to meet the Maastricht deficit ceiling of 3.0 per cent, posting a deficit of €1.127bn or 6.3 per cent of GDP.

In 2012 the island’s total GDP stood at €17.887bn, compared with €17.979bn recorded in 2011. Revenues last year increased slightly to 40.0 per cent of GDP from 39.7 per cent in 2011.

Public spending reached 46.3 per cent of GDP, while in 2011 it had fluctuated at 46 per cent of GDP.

In its scenario from February, the European Commission had estimated a slightly lower eurozone deficit of 3.5 per cent for 2012 before France overshot its target by 0.3 points.

Despite mounting criticism against austerity, the EU’s Economic and Monetary Affairs Commissioner Olli Rehn defended the strategy at the weekend IMF summit.

“We remain convinced that there is no viable alternative to consolidation, as its absence could lead to even more negative consequences,” Rehn argued.

Still, austerity should be conducted “in a growth-friendly manner”, he said. “This means that the speed of consolidation has to be differentiated across countries according to their fiscal space.”

The Commission's projections for eurozone debt foresee a further rise this year to 95.1 per cent of GDP and next year to 95.2 per cent.

Rehn has repeatedly warned against letting debt rise above 90 per cent of GDP. In a letter to finance ministers in February, he wrote that “it is widely acknowledged, based on serious academic research, that when public debt levels rise above 90 per cent they tend to have a negative impact on economic dynamism, which translates into low growth for many years”.