Greece and Portugal “figured” as “elite” members of PIGS in terms of public debt about 14 years ago. However, they seem to be doing much better today than other countries.
Greece and Portugal have managed to balance the accounts, showing that debt repayment is possible. Portugal has even managed to reduce its public debt below that of Spain, while Greece is expected to do the same in relation to Italy, within three years at the most.
Greece is a champion
At the end of 2023, Greek public debt stood at 160.3% of GDP, down 12 percentage points year-on-year. In fact, the decrease was the largest among the countries of the European Union on an annual basis.
“Continued debt reduction and structural reforms are vital for Greece,” Scope Ratings’ experts reported and added: “To further improve Greece’s creditworthiness, stable nominal economic growth and continued fiscal consolidation are required for ensuring a significant reduction in public debt to GDP, even though it has already fallen to pre-Covid levels. The government must promote reforms and maintain prudent management of public finances to ensure further sustainable debt reduction.”
The eurozone debt
In the eurozone, public debt fell to 89.9% of GDP from 90.3% in the second quarter of 2023 and 92.2% in the third quarter.
After Greece, Italy (140.6% of GDP), France (111.9%), Spain (109.8%), Belgium (108%) and Portugal (107.5%) had the highest percentages, while the lowest were Estonia (18.2%), Bulgaria (21%), Luxembourg (25.7%), Sweden (29.7%) and Denmark (30.1%).
The Italian problem
According to the report published last Friday, Italy’s debt-to-GDP ratio will surpass Greece’s ratio.
“The Italian government must design and implement a credible medium-term fiscal consolidation plan to stabilize the public debt, given the problems created by high borrowing costs, excessive tax incentives and delays in spending on the recovery plan to encourage development,” according to Scope experts.
Italy’s public debt will rise
“Italian public debt will rise in the coming years due to tax incentives in the construction sector. These measures have increased significantly over the past three years and have already worsened the fiscal deficit but will only count as additional public debt in the coming years,” said Nicola Nobile, an analyst at Oxford Economics.
“The outlook is not encouraging,” another economist at Commerzbank noted. It is estimated that “the average debt will be higher than the nominal growth rate in the coming years, due to the increase in interest rates as a consequence of lower inflation.”
