Eurozone deficits fall as austerity bites

image captionGermany saw both its deficit and overall debt levels fall last year

Eurozone governments managed to cut sharply their budget deficits last year, but overall debt levels continued to rise, official figures have shown.

The deficit to GDP ratio for the bloc as a whole fell to 4.1% from 6.2% in 2010, Eurostat said . The overall debt to GDP ratio rose to 87.2% from 85.3%.

The Republic of Ireland, Greece and Spain had the highest deficits.

Eurozone governments have introduced far-reaching austerity measures designed to cut deficits.

The deficit ratio is the difference between a government's annual expenditure and its revenues, expressed as a percentage of its annual GDP. The official deficit target, as laid down in the Maastricht Treaty, is 3% of GDP.

Following the financial crisis of 2008, a year in which the eurozone's deficit ratio stood at 2.1%, budget deficits increased significantly as governments spent billions of euros on bail-out packages and stimulus measures.

More recently, governments have cut spending in order to reassure international lenders of their credit worthiness and bring deficits back towards target.

The Irish Republic reduced its deficit from 31.2% in 2010 to 13.1% last year; Greece from 10.3% to 9.1% and Spain from 9.3% to 8.5%.

However, the Irish government says its deficit last year was 9.4%, beating the target of 10.6% set as a condition of its international bailout, when the money it injected into its banks is taken out.

Germany cuts its budget deficit from 4.3% to 1% of GDP.

Outside the eurozone, the UK saw its deficit fall from 10.2% to 8.3%.

However, overall debt levels across the eurozone continued to rise last year.

The debt ratio is a country's total stock of debt expressed as a percentage of its total annual economic output.

The debt to GDP ratio in the Irish Republic rose from 92.5% to 108.2%, in Greece from 145% to 165%, and in Portugal from 93.3% to 107.8%.

The UK's debt ratio rose from 79.6% to 85.7%.

By contrast, Germany managed to cut its debt ratio from 83% to 81.2%.

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