Denmark’s public debt falls
The entire EU public debt is steadily falling. Denmark’s finances in particular are improving, which is also reflected in the Danish municipalities. This shows new figures from Statistics Denmark.
The statistics show, among other things, that there are marked differences in the EMU debt of the various euro area countries. Estonia is at the top with only 9.5% of GDP debt, while Greece is the country with the largest public debt of 179% of GDP.
EMU debt includes a consolidated statement of significant debt items in government, municipalities and regions. In other words, the country’s public debt.
Public debt of EU countries
The EU countries have a total average debt of 83.5% of GDP, which has been declining since 2014 by about 3 percentage points after several years of increase.
Denmark has one of the absolute lowest rates in Europe in terms of EMU debt. The debt is 37.7% of GDP, equivalent to DKK 779bn. This makes Denmark a model example compared to crisis-hit countries like Portugal, which have a debt of 130.4% of GDP, Italy with a debt of 132.6% GDP and Greece, whose EMU debt is 179% of GDP .
Denmark is thus in sixth place in relation to the lowest debt in Europe and is thus surpassed only by Estonia, Luxembourg, Bulgaria, the Czech Republic and Romania. All the above countries, Denmark included, are thus within the 60% criterion, which is stated in the Stability and Growth Pact.
The EU’s 60% criterion
According to the Stability and Growth Pact, the normal gross debt limit is 60% of GDP in normal circumstances. This means that a country must have a maximum debt of 60% of its total GDP. There are only 12 euro countries that meet this requirement. These countries are marked in green in the map.
Other 60% compliance criteria are Malta, Poland, Slovakia, Sweden, Lithuania, Latvia, Romania, Czech Republic, Bulgaria, Luxembourg and Estonia.
Estonia as a pattern example
Estonia is the euro country that performs best at present. With an EMU debt of 9.5% of their GDP, Estonia is the eurozone with the least public debt. They thus remain well below the EU’s 60% criterion. This point, however, is not the only point where Estonia is shining – in many other respects, the country is the EU cloth.
In addition to the above, Estonia also fulfills another important criterion on the annual government deficit. The annual government deficit should not exceed -3% of the country’s total GDP. The deficit for Estonia was in 2016 at 0.3% of GDP, when compared to -0.9% in Denmark. Only two countries failed to meet the above criterion. Spain, respectively, with -4.5% and France with -3.4%.
The fact that Estonia does so well may be due to a number of factors. One of the reasons for this is that the country has a much smaller economy than, for example, Denmark. With a total GDP of 23.14 billion. USD, the GDP of Estonia is 13 times less than that of Denmark, which is DKK 306.1 billion. dollars.
Looking at the country’s public revenue and expenditure, it is clear that Estonia has more expenses than revenue. One could wonder about the low EMU debt, but since this is a gross debt concept, only the liabilities are taken into account. Thus, the difference between assets and liabilities is not measured. Therefore, only expenses such as debt obligations and not investments are included, which can be part of the explanation for Estonia’s low debt.
If you highlight Denmark’s net debt, you also get a completely different picture than the EMU debt. Denmark’s net debt represented 6.5% of total GDP in 2016. This is a marked difference to the aforementioned 37.7% EMU debt. This is because the assets are not included in the EMU debt, which means that Denmark’s deposits with Danmarks Nationalbank are not included.
Now we have looked at how the economic situation looks at EU level, but how does the financial landscape in Denmark look? We get answers to this in the map below, which shows the long-term debt of the Danish municipalities per inhabitant.
Map of municipal debt
Each year, all municipalities are allocated an amount from the Ministry of the Interior, which is budgeted for fixed costs and financing of projects. If this amount is not enough, the municipalities have the opportunity to borrow.
The municipalities’ loan options are also regulated by the Ministry of the Interior. They make sure that the municipalities cannot borrow for anything. For example, they cannot borrow for the construction of new buildings, but may like to borrow for energy improvements.
The result of the above is a long-term debt that the municipalities must repay. Denmark has a total of 5 regions with a total of 98 municipalities, which in 2016 had an average long-term debt of DKK 14,898 per. inhabitant.
How do the accounts look out in Denmark’s municipalities?
On the above map, the various municipalities’ debt is visualized. The municipalities marked with red symbolize the municipalities that have a debt above average, whereas the green ones illustrate the municipalities with a debt under the amount.
In 2016, Tårnby was the municipality with the lowest debt of only DKK 9 per share. inhabitants, whereas Samsø municipality had the highest debt of DKK 124,302 per inhabitant. There is a marked jump to the second highest debt, which is made up of Furesø municipality, which has a debt of DKK 66,362 per. inhabitant.
As seen in the above example, the debt fluctuates greatly among the municipalities. Mostly, however, most municipal debt lies between DKK 10,000 and DKK 20,000 per capita. inhabitant.
The size of the long-term debt and development is something that is well-kept in the Ministry of Finance, as this helps to ensure a healthy municipal economy. The overall goal is not to be debt-free, as it is necessary for the municipalities to invest in order to ensure future development. The municipalities, on the other hand, have the goal of reducing the debt and, at the same time, giving room for the possibility of development in the municipality.
