Thanks to governments’ fiscal consolidation efforts, the strong economic recovery as well as the ECB’s monetary policy measures pushing down refinancing costs, the Eurozone public deficit has declined from -6.2% of GDP in 2010 to -0.5% in 2018. This is a remarkable improvement. In fact, since the inception of the euro the aggregate public deficit in % of GDP has never been smaller. With the exception of Cyprus, all Eurozone countries managed to respect the -3% Maastricht criterion, with nine member avoiding to run a deficit altogether. The improvement in the debt burden however remains more timid. At 85.1% of GDP in 2018, it has declined from 92% in 2014 but still remains 20pp above the 2007 pre-crisis figure. Worryingly, 12 Eurozone countries are still boasting debt ratios of more than 60% of GDP – with Greece, Italy, Portugal, Cyprus and Belgium even registering above the 100% mark. Going forward, the favorable trend looks set to reverse: As the Eurozone economic momentum has cooled notably in recent months while social discontentment remains on the rise, the focus is on fiscal policy to save the day. We expect the Eurozone deficit to rise to an annual average of -1% of GDP in 2019-2020.
