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Stability and Growth Pact

Stability and Growth Pact

CSO statistical publication, , 11am

Before the introduction of the Macroeconomic Imbalance Procedure (MIP), the EU monitored economic and fiscal developments within the economies of member states through the Stability and Growth Pact (SGP). This framework now operates in tandem with the MIP and sets thresholds on both government deficits (3% of GDP) and government debt levels (60% of GDP). The reporting of the Excessive Deficit Procedure (EDP) statistics, which is a requirement for all EU member states, forms part of the monitoring of the SGP obligations. The corrective arm of the Stability and Growth Pact goes further in ensuring that member states adopt appropriate policy responses to correct excessive deficits (and/or debts) by implementing the EDP.

In March 2020, the European Commission, endorsed by the European Council, activated the 'general escape clause' of the Stability and Growth Pact. The clause was introduced as part of the 'Six-Pack' reform of the Stability and Growth Pact in 2011 and was activated for the first time during the COVID-19 pandemic. Activation of the clause allows Member States to temporarily deviate from the budgetary requirements and provides flexibility to address the health crisis and its direct economic consequences.

General Government Gross Debt

General Govt. Gross debt as % of GDPMIP Threshold

Source publication: Government Finance Statistics - Annual 2016 to 2021 (October 2022 Results)

Get the data: PxStat GFA13 (Government Debt), PxStat NA005 (GDP)

 This indicator is part of the SGP which was introduced in 1993. It is the same as Headline Indicator 9  from the MIP Scoreboard. From 2012 to 2018, Ireland breached the 60% threshold of the Stability and Growth Pact for general government (GG) debt as a percentage of GDP. In 2019, GG debt as a percentage of GDP dropped to 57.0%, constituting the first time in over eight years that this indicator did not breach the threshold. It should be noted that the main driver of the decrease in this indicator in 2015 was the large increase in Ireland's GDP, as there was only a small decrease in the level of government debt in that year in monetary terms. Similarly, decreases in the value of this indicator since 2015 were also mainly caused by growth in GDP. The value of GG Debt increased to 58.4% in 2020 as a result of borrowing to fund measures combatting the effects of the COVID-19 pandemic. In 2021 the value of GG Debt decreased to 55.4%. While GG Debt in monetary terms increased by 8.4% in 2021, the impact of this was offset by GDP growth of 14.3% over the year, resulting in an overall decrease of 3% in the GG Debt indicator.

Gross and Net Government Debt

Annual Gross Debt (% of GDP)Annual Net Debt (% of GDP)

Source publication: Government Finance Statistics - Annual 2016 to 2021 (October 2022 Results)

Get the data: PxStat GFA13 (Government Debt), PxStat NA005 (GDP)

Both the MIP and SGP use the gross debt concept. A more complete analysis of public indebtedness examines the corresponding assets and computes net government debt, i.e. gross government debt minus the value of the corresponding financial assets (currency and deposits, debt securities and loans). The gap between gross and net debt peaked in 2012 at 32.9% of GDP. This gap declined steadily from 2013 to 2015 and levelled out from 2016 with values close to 9% of GDP. In 2021, general government net debt rose by €6.8bn to €192.3bn (45.1% of GDP). 

It is important to note that both gross and net debt exclude equity and other assets/liabilities. For a complete picture of the general government balance sheet and net worth see the annual GFS release linked above.

General Government Surplus/Deficit

Annual General Government Surplus/Deficit (% of GDP) (Left axis)MIP Threshold (left axis)Annual Revenue (right axis)Annual Expenditure (right axis)

Source publication: Government Finance Statistics - Annual 2016 to 2021 (October 2022 Results)

Get the data: PxStat GFA01 (Government Revenue/Expenditure), PxStat NA005 (GDP)

General government deficits decreased from 2012 to 2017, with both increases in overall revenue, as economic recovery took hold in the wake of the financial crisis, and lower levels of expenditure. In 2015, the general government deficit fell within the SGP threshold for the first time since the financial crisis, and this trend continued into 2017 where the deficit was reduced to 0.3% of GDP. Surpluses of 0.1% and 0.5% of GDP were seen in 2018 and 2019 respectively, the first surpluses seen since 2007. 2020 saw a general government deficit of 5% of GDP, in breach of the SGP deficit threshold of 3%. This was due mainly to the impact of COVID-19, which adversely affected both Revenue and Expenditure. In 2021 the deficit reduced to 1.7% no longer breaching the SGP deficit threshold.