The debt burden in the 17 European Union countries that use the euro hit an all-time high at the end of the first quarter of the year, according to official figures released on Monday. Government debt as a proportion of the area’s GDP hit a record 92.2 percent, up from 90.6 percent in the previous quarter and 88.2 percent a year ago.
Austerity measures have been strictly implemented in the eurozone, particularly for countries like Greece that received bailouts, with the promise that budget cutting would lead to growth. Yet it has had the opposite effect. Greece, which has the highest debt to GDP ratio in the area at 160.5 percent, has experienced higher unemployment and slower growth than had been predicted when it embarked on austerity measures. Its economy has contracted so far that some investors no longer consider it a developed country. Overall, the eurozone has experienced its longest-ever recession and record high unemployment rates amid austerity measures.
The news of high debt levels in countries that have relentlessly pursued austerity comes as the leaders of the G-20 countries embraced growth policies over budget cutting this weekend. The leaders stated that their “near-term priority is to boost jobs and growth,” shifting from previous summits that placed emphasis on getting budgets in order. In the wake of the summit, one U.S. Treasury official said, “The debate between growth and austerity seems to have come to an end.”
Many european officials have also begun to move away from demands for austerity. Yet the pressure on countries like Greece that are receiving bailout funds to pursue budget cutting measures continues.
The U.S. has been a big proponent of focusing on short-term growth over budgets, and it initially avoided the pitfalls of austerity in response to the economic collapse in 2009 when President Obama signed a large stimulus package into law. That bill halted the recession and put the U.S. on a faster pace of growth than in Europe, which turned to deficit reduction. But since then the U.S. has also turned to heavy budget cutting, with sequestration the latest measure to hurt economic growth.