<p>They've already adopted the Euro (from which there's no "easy way out") so the convergence criteria is just dead letter after that...</p>

<p>The EU has a procedure called the <a href="https://en.wikipedia.org/wiki/Stability_and_Growth_Pact" rel="nofollow noreferrer">EDP</a> (Excessive Deficit Procedure), which seems to apply to both excess deficit (3%) and (in theory, I think) the debt/gdp ratio too (60%). In general it seems the EDP was mainly applied against the former rather than the latter criterion... and even then it took e.g. Spain <a href="https://english.elpais.com/elpais/2019/06/06/inenglish/1559810340_855598.html" rel="nofollow noreferrer">a decade</a> to come out of EDP (even though they don't meet the latter debt criterion still; it seems the EU just needs to be happy that they have a plan in that regard). The EDP criteria apply to all EU members.</p>

<p>Also, if you're part of a "small currency" you are more easily punished on forex market, as opposed to the bond market where southern Eurozone took their pounding--"Eurozone crisis" and all that.</p>

<p>Based on <a href="https://www.imf.org/external/datamapper/GGXWDG_NGDP@WEO/EURO/BGR/HRV/CZE/DNK/HUN/POL/ROU/SWE/DEU" rel="nofollow noreferrer">IMF data</a>, of the non-Eurozone EU members, Hungary and Croatia aren't too far from the Eurozone average and have more debt/gdp than Germany. Poland has less than Germany, but not a whole lot less and they might cross in the next 5 years given the current trends.</p>

<p><a href="https://i.sstatic.net/4ubrc.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/4ubrc.png" alt="enter image description here"></a></p>

<p>In the lower debt/gdp group are two Nordic countries Denmark and Sweden, but also two Eastern countries, Romania and Bulgaria. (The fifth in this group is the Czech Republic.) Romania, Bulgaria and the Czech Republic for example have among the lowest <a href="https://ec.europa.eu/eurostat/statistics-explained/index.php/Social_protection_statistics" rel="nofollow noreferrer">social spending as a ratio of GDP</a> as well. Denmark and Sweden are at the opposite end in that regard; explaining their lower debt/gdp is not that easy. You might want to look at these countries individually...</p>

<p>Denmark apparently had the "crown" in taxes in the EU at <a href="https://www.thelocal.dk/20191030/denmark-s-income-and-wealth-taxation-is-highest-in-eu-relative-to-gdp" rel="nofollow noreferrer">in 2019</a>; this could well compensate the higher social spending, as far as government debt goes. <a href="https://ec.europa.eu/eurostat/documents/2995521/10190755/2-30102019-AP-EN.pdf/68739572-f06a-51e4-3a5b-86e660a23376" rel="nofollow noreferrer">For 2018</a> on which I could find more detailed tax-to-GDP ratios, Denmark and Sweden are very close. Also Denmark and Sweden have experienced <a href="http://www.nationalbanken.dk/en/publications/themes/Pages/How-has-Denmark-managed-since-the-finansial-crisis.aspx" rel="nofollow noreferrer">growth compared to Germany's</a>, somewhat exceeding the UK's.</p>

<p>The flip side is that there's a high level of <em>household</em> debt in Denmark (130% of GDP <a href="https://ec.europa.eu/eurostat/statistics-explained/index.php/Households_-_statistics_on_financial_assets_and_liabilities#Assets_and_liabilities_relative_to_GDP" rel="nofollow noreferrer">in 2018</a>) and Sweden is also well about average(90%) while Germany's (54%) is below EU average (66%)... which in this case is also slightly above Eurozone average (62%) (no doubt the latter is explained by the UK in this case). The Eastern counties are also far below [either] average. (Denmark seldom makes the news in the same sentence as "the IMF", but when it does, it's <a href="https://www.cnbc.com/2016/05/05/imf-warns-this-oil-rich-nordic-country-of-growth-risks.html" rel="nofollow noreferrer">because</a> of IMF's concern/warning about household debt.)</p>

<p><a href="https://i.sstatic.net/uoxBy.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/uoxBy.png" alt="enter image description here"></a></p>

CC BY-SA 4.0
2020-02-16T02:45:18.600Z
2020-02-16T05:40:37.190Z
2020-02-16T05:40:37.190Z
fantastic peace and prosperity
<p><a href="https://i.sstatic.net/s4oKL.jpg" rel="nofollow noreferrer"><img src="https://i.sstatic.net/s4oKL.jpg" alt="enter image description here"></a></p>

<p>As you could find out from the map, among 22 countries whose debt-to-gdp ratio is above 50%, only 7 are not Eurozone members, and from which only UK is comparably large economical entity.</p>

<p>Interestingly, according to <a href="https://en.wikipedia.org/wiki/Euro_convergence_criteria" rel="nofollow noreferrer">Euro convergence criteria</a>, to adopt the euro as one country's currency:</p>

<blockquote>
  <p>The ratio of gross government debt (measured at its nominal value
  outstanding at the end of the year, and consolidated between and
  within the sectors of general government) relative to GDP at market
  prices, must not exceed 60% at the end of the preceding fiscal year.</p>
</blockquote>

<p>So what's the reason behind that most Eurozone members have a higher Debt-to-GDP ratio?</p>

<government-debt><euro-area><european-union>
Why do Eurozone members have a commonly higher Debt-to-GDP ratio?
Rahn
# Why do Eurozone members have a commonly higher Debt-to-GDP ratio?

(Asked by: username_0 on 2020-02-15)

[![enter image description here](https://i.sstatic.net/s4oKL.jpg)](https://i.sstatic.net/s4oKL.jpg)

As you could find out from the map, among 22 countries whose debt-to-gdp ratio is above 50%, only 7 are not Eurozone members, and from which only UK is comparably large economical entity.

Interestingly, according to [Euro convergence criteria](https://en.wikipedia.org/wiki/Euro_convergence_criteria), to adopt the euro as one country's currency:

> The ratio of gross government debt (measured at its nominal value
> outstanding at the end of the year, and consolidated between and
> within the sectors of general government) relative to GDP at market
> prices, must not exceed 60% at the end of the preceding fiscal year.

So what's the reason behind that most Eurozone members have a higher Debt-to-GDP ratio?

**Tags:** government-debt, euro-area, european-union


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## 1 answers

### Answer by username_1 on 2020-02-16. Score: 1

They've already adopted the Euro (from which there's no "easy way out") so the convergence criteria is just dead letter after that...

The EU has a procedure called the [EDP](https://en.wikipedia.org/wiki/Stability_and_Growth_Pact) (Excessive Deficit Procedure), which seems to apply to both excess deficit (3%) and (in theory, I think) the debt/gdp ratio too (60%). In general it seems the EDP was mainly applied against the former rather than the latter criterion... and even then it took e.g. Spain [a decade](https://english.elpais.com/elpais/2019/06/06/inenglish/1559810340_855598.html) to come out of EDP (even though they don't meet the latter debt criterion still; it seems the EU just needs to be happy that they have a plan in that regard). The EDP criteria apply to all EU members.

Also, if you're part of a "small currency" you are more easily punished on forex market, as opposed to the bond market where southern Eurozone took their pounding--"Eurozone crisis" and all that.

Based on [IMF data](https://www.imf.org/external/datamapper/GGXWDG_NGDP@WEO/EURO/BGR/HRV/CZE/DNK/HUN/POL/ROU/SWE/DEU), of the non-Eurozone EU members, Hungary and Croatia aren't too far from the Eurozone average and have more debt/gdp than Germany. Poland has less than Germany, but not a whole lot less and they might cross in the next 5 years given the current trends.

[![enter image description here](https://i.sstatic.net/4ubrc.png)](https://i.sstatic.net/4ubrc.png)

In the lower debt/gdp group are two Nordic countries Denmark and Sweden, but also two Eastern countries, Romania and Bulgaria. (The fifth in this group is the Czech Republic.) Romania, Bulgaria and the Czech Republic for example have among the lowest [social spending as a ratio of GDP](https://ec.europa.eu/eurostat/statistics-explained/index.php/Social_protection_statistics) as well. Denmark and Sweden are at the opposite end in that regard; explaining their lower debt/gdp is not that easy. You might want to look at these countries individually...

Denmark apparently had the "crown" in taxes in the EU at [in 2019](https://www.thelocal.dk/20191030/denmark-s-income-and-wealth-taxation-is-highest-in-eu-relative-to-gdp); this could well compensate the higher social spending, as far as government debt goes. [For 2018](https://ec.europa.eu/eurostat/documents/2995521/10190755/2-30102019-AP-EN.pdf/68739572-f06a-51e4-3a5b-86e660a23376) on which I could find more detailed tax-to-GDP ratios, Denmark and Sweden are very close. Also Denmark and Sweden have experienced [growth compared to Germany's](http://www.nationalbanken.dk/en/publications/themes/Pages/How-has-Denmark-managed-since-the-finansial-crisis.aspx), somewhat exceeding the UK's.

The flip side is that there's a high level of *household* debt in Denmark (130% of GDP [in 2018](https://ec.europa.eu/eurostat/statistics-explained/index.php/Households_-_statistics_on_financial_assets_and_liabilities#Assets_and_liabilities_relative_to_GDP)) and Sweden is also well about average(90%) while Germany's (54%) is below EU average (66%)... which in this case is also slightly above Eurozone average (62%) (no doubt the latter is explained by the UK in this case). The Eastern counties are also far below [either] average. (Denmark seldom makes the news in the same sentence as "the IMF", but when it does, it's [because](https://www.cnbc.com/2016/05/05/imf-warns-this-oil-rich-nordic-country-of-growth-risks.html) of IMF's concern/warning about household debt.)

[![enter image description here](https://i.sstatic.net/uoxBy.png)](https://i.sstatic.net/uoxBy.png)


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