In spite of years of harsh spending cuts and tax rises, Europe’s debt problems are getting worse.
For the first time since the euro was launched in 1999, official figures showed on Wednesday that at the end of the second quarter the total debt of the 17 countries that use the single currency was worth 90% of the value of the euro zone’s economy.
The rise from the previous quarter’s 88.2% and the previous year’s equivalent of 87.1%, as reported by Eurostat, the EU’s statistics office, is a result of the euro zone’s economic problems — which make it harder for countries to handle their debts.
Six of the countries that use the euro are in recession — Greece, Spain, Italy, Malta, Portugal, and Cyprus. Many analysts expect the euro zone to officially slip back into recession in the third quarter of the year when official figures are published next month. A recession is technically defined as two quarters of negative growth in a row.
A shrinking economy makes the value of a country’s debt as a proportion of the size of its economy worse.
Over the past year, Italy’s debt burden, for example, has risen from 123.7% in the first quarter to 126.1 percent in the second quarter — that’s come while its economy has shrunk for four straight quarters.