Government Debt versus GDP Ratio Rises 11% y/y - Eurostat

At a sharp year-on-year rise of 11 percent in the first quarter of 2012, Cyprus recorded the second-highest rise in its government debt-to-GDP ratio in the Eurozone, said Eurostat.

In the first quarter of 2011, government spending stood at 11.1 billion euros, or 63.6 percent of GDP. A year later, this figure rose to 13.2 billion euros, or 74.6 percent of total GDP for the first quarter, said Eurostat. The news comes amid negotiations between the government and Troika as the government rapidly runs out of money and options amid its higher spending habits.

The government has been slated for refusing to cut back spending even amid a deepening recession, and is set to receive rescue funds from the European Financial Stability Fund (EFSF). According to members of the government, like President Demetris Christofias and his spokesman Stefanos Stefanou, the country is turning to the EFSF only because of banking woes. But analysts point out that if the government had kept its own books balanced, it would be in a position to directly recapitalise the banks and avoid a deeper recession.

Earlier this month, the government nationalised Cyprus Popular Bank and committed to 1.8 billion euros in recapitalisation funds, which are expected to come from the bailout.

Cyprus' government debt is broken down into 42.1 percent securities other than shares, and 32.5 percent loans, according to the survey.

Portugal recorded the biggest increase in spending versus GDP, posting a 17 percent rise in government spending versus GDP, according to the survey.

In the broader euro area, government spending versus its GDP stood at 88.2 percent, said Eurostat.

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