Much Higher Effective National Debt in the Euro-Foundation States

A study from the research center „Generationenverträge“ of the University of Freiburg arrives at the conclusion that the explicitly reported national debts of the 12 Euro-Foundation States are not correct because to some extent they do not consider future liabilities as e.g. pensions, health and care benefits. From both an accounting and demographic point of view these promised public benefits must not be neglected. If states were subject to the accounting law valid for companies, we would speak about balance sheet manipulation in this case. Greece e.g. had been making window dressing over many years so as to hide its financial grievance. Furthermore the demographic trend in the industrialized countries leads to higher expenses and lower economic growth which has a negativ impact on the debt-to-GDP ratio.

Therefore the study concludes that the explicitly reported national debts account for only a little part of the effective overall debts. In doing so Italy ranks first with an effective debt-to-GDP ratio of 146% before Germany with 192% and Finland with 195%. The three countries with the highest effective debt-to-GDP ratios are Greece with 1017%, Luxembourg with 1116% and Ireland with 1497%. The effective absolute debt of all the 12 Euro-Foundation States amounts to incredible 31.000 billion Euros!

Effective Debt of the 12 Euro-Foundation States (pdf)

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