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European austerity yields meager results in 2012

Published on NewsOK Modified: April 22, 2013 at 10:53 am •  Published: April 22, 2013

IRELAND — The second euro country to receive a bailout is widely viewed as the poster child of austerity and its performance in 2012 showed further improvements. As well as reducing annual borrowing to 12.5 billion euros from 21.3 billion, Ireland saw its deficit shrink to 7.6 percent of annual GDP against 13.4 percent the year before. Unlike fellow bailout recipients, Ireland has managed to post some economic growth for most of the past three years and is ahead of its target to prune the budget deficit to 3 percent by 2015. In a further sign of its reputational rebound, Ireland has resumed limited auctions of long-term bonds at a relatively low cost and is confident of exiting its bailout program later this year.

PORTUGAL — In spite of winning praise from its international creditors, Portugal's deficit swelled to 6.4 percent of annual GDP from 4.4 percent the year before. However, the 2011 figure was flattered by the transfer of private banks' pension funds to the Treasury, which temporarily improved the balance sheet. In 2012, the government's plan to use 3.1 billion euros from the privatization of airport management company ANA to lower its deficit fell foul of Eurostat, which didn't allow the inclusion of that revenue in the deficit calculation.

SPAIN — In spite of efforts to get a handle on its debts, Spain saw its budget deficit rise to 10.6 percent of GDP in 2012, the highest in the eurozone. It rose from 9.4 percent the year before as the country took 40 billion euros in rescue loans to help its banks. Excluding the rescue funds, Spain says its deficit last year improved to just below 7 percent, but still above the initially pledged target of 6.3 percent.

FRANCE — At first glance, the public finances in Europe's second-biggest economy appear to be in relatively good health — its deficit in 2012 fell to 4.8 percent of annual GDP from 5.3 percent the year before. However, there are growing concerns over the outlook as growth has stalled. The French government originally promised to reduce its deficit to 3 percent this year, bringing it in line with European rules. But slow growth has knocked it off track, and the government has said the deficit will be 3.7 percent. France has a history of overly rosy forecasts, and some say the government's numbers are still too optimistic.

GERMANY — While many of its euro partners are struggling to get a grip on their public finances, Germany has done so and more. In 2012, it posted a budget surplus of 4.1 billion euros, in contrast to the 20.2 billion euros deficit the year before. A number of factors helped, including restrained spending, lower debt servicing costs and falling unemployment, which means less outlays for jobless benefits. But economists said state income was also significantly boosted by so-called "bracket creep" — the failure of the government to move tax rates up along with inflation. That means workers who are increasingly winning pay raises in the country's tight job market are pushed into paying higher rates — and more tax.


Elena Becatoros in Athens, Sarah DiLorenzo in Paris, Ciaran Giles in Madrid, Barry Hatton in Lisbon, David McHugh in Frankfurt, Shawn Pogatchnik in Dublin and Paul Wiseman in Washington contributed to this report.