Number of the week: Germany, France not immune to debt problems
2011-11-28 11:26:00
37,700 euros: Euro zone debt per working-age person in 2011
Pressure has built on France and Germany to shore up the finances of their struggling partners in the euro zone, but the two countries have debt issues of their own that could limit the amount of help they can extend.
Greece, Ireland and Italy have been at the forefront of the sovereign debt crisis in the euro zone and for good reason. They have the highest debt per working-age person in the common-currency region. According to data from the European Commission, Greece has some 47,000 euros of debt per capita, while Ireland and Italy have 55,000 euros and 48,000 euros, respectively. The euro zone average is 37,700 euros.
France and Germany are better off than Greece, Ireland and Italy, but they’re still above the euro zone average. France has 40,000 euros in debt for each person in the country, while Germany is at 39,000 euros per capita. That puts both of them above Portugal and Spain, which are often lumped in with the struggling periphery. Portugal debt per capita is 25,000 euros, while Spain’s is 24,000 euros.
To be sure, France and Germany have larger economies and better growth prospects. Greece, Ireland, Italy and Portugal all have debt-to-GDP ratios in excess of 100%, according to the European Commission data. But France and Germany are both above 80%. The Stability and Growth Pact that sets out conditions for membership in the euro zone sets 60% as the maximum ratio.
A lot of that excess debt was built up in the wake of the global financial crisis that hit in 2008 and a level above 80% isn’t insurmountable for stable growing economies. And Germany’s general-government deficit is expected to be 1.3% of its GDP this year, so it isn’t adding as much to its debt. But the sovereign debt crisis is already putting France and Germany on the hook for contributions to the European Financial Stability Fund, in addition to commitments to the European Central Bank and the International Monetary Fund. If all those responsibilities are called in, French and German debts could make Greece look austere.