April 23, 2018 / 9:15 AM / a year ago

Euro zone debt, deficit drop in 2017 as economy grows

BRUSSELS (Reuters) - The euro zone’s public debt and deficit dropped last year as the bloc’s economy grew at a healthy rate, provisional data from the European Union’s statistics office showed on Monday.

Debt in the 19-country currency bloc fell to 86.7 percent of gross domestic product last year from 89.0 percent in 2016, Eurostat said using data provided by member states.

The deficit dropped to 0.9 percent of GDP from 1.5 percent in 2016, Eurostat said.

The improvement in public finances can reduce governments’ funding costs.

The fall in the budget shortfalls was partly due to the bloc’s strong growth last year, which the European Commission in its last economic forecast in February estimated at 2.4 percent, the fastest pace in a decade.

Greece, which is approaching the end of its third bailout programme in August, saw its debt slightly drop to 178.6 percent of GDP from 180.8 percent in 2016.

While Athens’ debt remains the highest in Europe, its decline confirms the positive trend of the Greek economy, which also recorded a budget surplus last year of 0.8 percent of GDP, up from 0.6 percent in 2016, Eurostat said.

Italy’s public debt, the second largest in the bloc, was almost unchanged at 131.8 percent of GDP last year from 132.0 percent in 2016. But the deficit went down to 2.3 percent of GDP from 2.5 percent in 2016.

Eurostat confirmed that France last year recorded a deficit below the 3.0 percent threshold set by EU fiscal rules.

It said Paris had a deficit of 2.6 percent of GDP, down from 3.4 percent in 2016, in good news for French president Emmanuel Macron who took office last May.

However, Eurostat expressed reservations on “the quality of the data reported by France”. It urged a reclassification of some public expenditures that could slightly increase both the deficit and the debt.

Germany, the largest economy of the bloc, expanded its budget surplus to 1.3 percent of GDP last year, from a 1.0 percent surplus in 2016. Its debt went also down to 64.1 percent of GDP from 68.2 percent in 2016.

Reporting by Francesco Guarascio, editing by Robin Emmott

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