How the european public debt will end? Causes and solutions (new European laws)
Total accumulated public debt in the 28 Member States of European Union (EU) was equal to 86.8% of GDP in 2013 fourth quarter. It is worst for the Eurozone debt equal to 93.4% of GDP in the same period(1). Among the eleven States which are not Member of the Eurozone, only two are above the EU limit (60% of GDP)-United Kingdom and Hungary-.
The situation of the Eurozone is getting worse by the months with two exceptions-the Germany and the Austria debt level declined a little bit-. Among the 17 Member States of Eurozone, only four respect the EU limit of the Maastricht Treaty-Estonia, Duchy of Luxembourg, Finland, Slovakia-. Greece171.8% of GDP-, Portugal-128.7- and Ireland-124.8- had to be rescued (IMF and EU).
First cause of the public debt: budget deficit existed for ages
States excessively in debt didn’t respect the rule of balanced budget which consists in voting a balanced budget whereby expenditures don’t exceed incomes (except investment expenditures). If Member States of EU set up generous social policies, the situation could step back those social security benefits. After Thirty Year of growth and full employment succeeded economic slowdown, chronic unemployment and ageing population which added social expenditures and reduced tax revenue. Reforms aren’t sufficient.
Innovation impact and relocation of the production to merging countries can be added to the cause of the growing unemployment.
Since 1975, France has yearly budget deficits keep recurring(2). Contrary to the Thirty Years before 1975, the thirty year following (1975-2005), the growth rate is 2.3% of GDP (5.6% of GDP before). And now the growth rate islower than 1% of GDP, and public expenditures didn’t decrease till now.
Secondary causes od the public debt: the crisis, debt finencing system, tax fraud
Economic crisis has an undisered effect on budget deficit
Economic recession or stagnant GDP has an undisered effect on tax revenue while expenditures increase.