Eurozone debt piles grow to 90pc of output

 
Ben Southwood
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SOVEREIGN debts across Eurozone countries grew to nine tenths of the joint size of their economies, data revealed yesterday, just as other data suggested the Eurozone had slipped even deeper into recession.

Euro area government debt hit €8.52 trillion (£5.32 trillion) – 90.0 per cent of the seventeen countries’ total GDP – in the second quarter of 2012, Eurostat said, up from 88.2 per cent of GDP in the first quarter of the year.

The increase was driven by big increases in sovereign debt across southern Europe: Greece’s debt ratio rocketed up 13.4 percentage points, Cyprus’s soared 8.3 percentage points, while Portugal’s ratio climbed some 5.6 percentage points.

This came as a business survey suggested the currency bloc was sliding even deeper into economic slump. Markit’s purchasing managers’ index (PMI) for the Eurozone hit 45.8 in October, a 40-month low, and down from 46.1 in September.

This means that business activity in the economy has continually contracted since last September, with the exception of a small bounce-back in January.

Markit’s chief economist Chris Williamson said the gloomy PMI data implied Eurozone GDP would fall in the third and fourth quarters.

“The survey is running at a level which is historically consistent with the region’s economy contracting at a quarterly rate of over 0.5 per cent,” Williamson pointed out.

“Official data have shown surprising resilience over the summer, compared to the survey data, but the underlying business climate has clearly deteriorated markedly in recent months.”

“While GDP may decline only modestly in the third quarter, a steeper fall looks to be on the cards for the fourth quarter,” he added.

The PMIs came in tandem with survey data from Ifo that suggested that even Eurozone economic powerhouse Germany was being dragged into recession. Ifo’s overall business climate index fell for the six successive month to hit 100, the average level all the way back in 2005.