EUROPE’S DEBT in late 2011 stood well above the EU’s limits for a healthy economy, with even powerhouse Germany bearing a debt load that could take decades to pay down, although borrowing as a proportion of output was smaller than for the United States.

The 27-nation European Union’s total government debt rose slightly to 82.2 per cent of economic output in the third quarter of 2011, statistics agency Eurostat said yesterday, while debt in the 17-nation euro zone declined to 87.4 per cent of output.

Europe’s debts soared from levels nearer EU limits of 60 per cent of gross domestic product following the introduction of the euro in 1999, as some countries indulged in massive borrowing at very low rates of interest.

Borrowing costs for sovereigns such as Italy and Spain were pushed to unaffordable levels late last year as the scale of their vulnerability became apparent to investors.

But with economic growth stalling as spending across the bloc is cut to bring down fiscal deficits, EU states face slow progress in lowering their debt burdens.

“It’s nice for EU policymakers to say that things aren’t as bad as the United States, but Washington still has market confidence and that cannot be said for all of Europe,” said Carsten Brzeski, a senior economist at ING.

US debt/GDP hit 100 per cent in 2011 and under its current trajectory would exceed 115 per cent of GDP by 2016, according to International Monetary Fund figures. Japan’s debt burden also exceeds the EU’s, with the IMF forecasting Tokyo’s gross debt to reach 250 per cent of GDP in 2015.

But Europe is not a single entity and even the euro zone’s monetary union is seen by many as an incomplete project, lacking the fiscal cohesion economists say it needs.

Debt levels vary hugely across the continent, from 6 per cent of GDP in Estonia to 159 per cent in Greece. Of the euro zone’s €8.2 trillion total government debt, some 70 per cent is owed by Germany, France and Italy. While Berlin can still bank on strong investor backing, France lost its top-notch rating last month when Standard Poor’s downgraded its sovereign debt from AAA.

Only 13 EU members had debts below the 60 per cent limit set by the European Commission in the third quarter. Just four of those were members of the 17-nation single currency area.

Yesterday’s data was the first of its kind released by Eurostat and reflects efforts to step up monitoring within the bloc. The World Bank said last month that Europe’s debts may not reach manageable levels until 2030. – (Reuters)