EU public deficits down sharply in 2006

(BRUSSELS) - European countries made strides last year in cleaning up their public finances, with deficit levels down sharply from the previous year, according to official EU figures published Monday.

The average deficit level in the eurozone as a percentage of gross domestic output (GDP) fell last year to 1.6 percent from 2.5 percent in 2005, the Eurostat data agency said.

A Eurostat official said that "at least half" of the drop was due to a sharp improvement in German finances, where the deficit fell to 1.7 percent in 2006 from 3.2 percent in 2005.

As Europe's biggest economy enjoyed its strongest growth in six years in 2006, more tax revenues than expected flooded into state coffers, helping the government cut the deficit.

Deficits were also down across the European Union, with the average falling to 1.7 percent last year from 2.4 percent in 2005.

Under EU rules, member states are supposed to keep their deficits to less than three percent of GDP, although only the 13 countries sharing the euro face the threat of fines if they consistently breach the limit.

While deficits were sharply lower, European countries were less successful in reducing debt, which is in effect the accumulation of money owed to pay for past deficits.

The eurozone's average debt level eased to 69.0 percent of GDP last year from 70.5 percent while in the EU the average slipped to 61.7 percent from 62.9 percent.

Further details - Eurostat press release