Chart of the week: EU debt/GDP ratios rising

Summary: The UK’s debt/GDP ratio fell in Q1; in most of the Eurozone, it rose

What the chart shows: The chart shows consolidated general government debt/GDP ratios in the UK and the euro area as %

Why is the chart important: One of the main consequences of the Great Recession has been an explosion in public debt. For the time being, the burden of this debt has been eased by ultra-low interest rates. However, at some stage, interest rates will begin to normalise; at that stage, debt – which regularly needs to be rolled over – will become increasingly expensive for governments to service. It is therefore crucial to at least bring the rise in debt under control as soon as possible. Latest data from Eurostat show that UK government debt/GDP fell slightly in Q1 this year. Faster output growth in Q2 means that it almost certainly fell slightly more in Q2. By contrast, for the euro area as a whole – and for all of its members barring Germany and Estonia – debt continued to rise. While output growth is the acute problem, debt is becoming a chronic one which will ultimately have to be dealt with – through repayment or default.

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