UPDATE 1-Euro zone debt level drops for first time in six years

Wed Jan 22, 2014 9:56am EST

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* Quarterly debt level falls for first time since end-2007
    * German, French and Italian debt levels fell
    * Overall debt still well above EU's 60 pct/GDP limit


    By Martin Santa
    BRUSSELS, Jan 22 (Reuters) - Euro zone government debt fell
for the first time in nearly six years in the third quarter of
2013, adding to signs the bloc is emerging from its crisis even
if the debt level remains well above the EU's limit.
    Sovereign debt fell as a proportion of national output in
all three of the euro zone's biggest economies, Germany, France
and Italy, as well as in Portugal, one of the five countries
that needed a bailout to help its government or its banks
through the crisis years.
    But debt rose relative to gross domestic product (GDP) in
Greece, where the debt crisis began, and Spain, which took a
bailout for its banks. 
    Debt in the 17 countries that shared the euro in 2013 stood
at 8.842 trillion euros ($12 trillion) in the three months to
September, statistics agency Eurostat said on Wednesday,
slightly down from 8.875 trillion euros in the second quarter.
    As a proportion of gross domestic product, it slipped to
92.7 percent, from 93.4 percent in the April-June period, still
well above the 60 percent limit stipulated in EU rules.
    It was the first decline in absolute terms since the fourth
quarter of 2007, Eurostat said, after more than four years of
crisis. The Commission expects overall euro zone debt to peak
this year at 95.9 percent, up from 95.5 percent in 2013.     
    Latvia joined the euro zone from Jan. 1 this year, boosting
the currency bloc's membership to 18 countries, but its debt
levels were not included in the calculations.
    The European Commission said the figures were in line with
their expectations, although the debt was higher when compared
with the same period of 2012 when it stood at 90.0 percent.
    "This stabilisation is the result of the fiscal
consolidation efforts undertaken in the past two years, the pace
of which has now slowed substantially, as well as the
improvement in economic conditions," European Commission
spokesman Simon O'Connor said.
    A senior European Commission official stressed that debt
issuance was usually weakest in the third quarter of a year and
that should be factored in when looking at the overall picture.
    More than 85 percent of overall debt comes from securities
other than shares, such as bonds and treasury bills, followed by
loans, currency and deposits as well as intergovernmental
lending related to the financial crisis.
    Germany's debt, the biggest in value at 2.12 trillion euros
($2.9 trillion), fell to 78.4 percent of its GDP and France's to
92.7 percent. 
    Italy's debt dropped to 132.9 percent Of GDP, but in Greece,
where the crisis began, the debt level rose to 171.8 percent of
GDP after two bailouts to avert bankruptcy.
    Spain's debt rose to 93.4 percent while Portugal's dropped
to 128.7 percent from 131.3 percent.
    "It is a good sign, which is in line with wider trends in
the euro zone showing signs of stabilisation," said Carsten
Brzeski, economist at ING, adding the level of debt in euro zone
and individual countries is still too high.
    Debt levels in most euro zone countries remain well above
the European Union's official limit of 60 percent of GDP, with
only Estonia, Latvia, Luxembourg and Slovakia below.
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