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Government finances improved across Europe in 2013

Government budget deficits fell across Europe in 2013, but overall debt burden rose slightly

BRUSSELS (AP) -- Governments across the 18-country eurozone made further headway in 2013 in reducing their deficits, official figures showed Wednesday in a further sign that spending cuts and the nascent economic recovery helped to heal government finances.

Eurostat, the EU's statistics office, found that the overall budget deficit across the eurozone fell to 3.0 percent of annual gross domestic product in 2013 from 3.7 percent the year before as borrowing fell to 293 billion euros ($404 billion) from 352 billion euros.

However, the overall figure masks huge divergences across the region, which has faced an acute debt crisis over the past four years that at times appeared to threaten the future of the euro currency itself.

Many governments in the eurozone, particularly those at the forefront of the debt crisis, such as Greece and Spain, have therefore enacted tough austerity measures to get a grip on their public finances. Spending cuts and tax rises have helped improve the budgetary situation in many countries but they weighed down the economies and led to rising unemployment.

Because most countries in the eurozone continue to borrow, Eurostat found the region's debt burden rose from 90.7 percent to 92.6 percent of GDP, or to 8.9 trillion euros ($12.3 trillion). Overall, that compares favorably with the United States which, according to the International Monetary Fund, had a debt burden of 105 percent in 2013, or about $17.5 trillion.

However, the key difference with the U.S. is that the eurozone countries have to borrow money in the financial markets on their own so they live and die by the state of their public finances.

In Greece, which is in its sixth year of recession which became the first country in the eurozone to be bailed out after the collapse of its government finances, saw its debt balloon yet further. The budget deficit rose from 8.9 percent to 12.7 percent and the total debt burden increased from 157 percent to 175 percent of GDP in 2013.

Still, the government in Athens is confident that the data would also bring good news for Greece. A separate analysis of the data to be published later Wednesday by the EU Commission is expected to show the country earned more revenues than it spent last year when the cost of servicing its debt is excluded.

That so-called primary budget surplus, if officially testified by the EU Commission, will entitle Greece to badly needed further debt relief under a deal with its bailout creditors.

The technicalities of how the eurozone is prepared to alleviate Greece's debt burden to help its economic recovery still have to be worked out, but most analysts expect a further lowering of interest rates and another extension of maturities on its rescue loans.

While Greece has the highest debt burden relative to its economy, trailed only by Italy with a debt burden of 133 percent of its output, tiny Estonia's debt stood only at a tenth of its economic output.

Germany, the EU's biggest economy, managed to balance its books in 2013 and saw its overall debt burden decreasing slightly to 78.4 percent of GDP, or 2.1 trillion euros.

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