Government debt refers to the main liabilities of the general government sector. Broadly speaking, it reflects the accumulation of past deficits. Find out more about the general government balance. 

There are several ways of measuring public or government debt. EU countries use the harmonised definition of government debt commonly known as “Maastricht debt” set out in the Council Regulation (EC) No 479/2009.

What is Maastricht debt?

Maastricht debt includes general government liabilities in the form of currency and deposits (e.g. savings or treasury certificates), debt securities (most notably, treasury bonds and bills) and loans of all entities within the government sector i.e. central, local and state governments, as well as social security institutions. 

This debt is calculated on a consolidated basis, meaning it does not include any general government debt held by other general government entities, such as treasury bonds held by social security funds from the same country. It is measured at face value, since this is the amount that the general government entities (issuers/debtors) are expected to repay at maturity.

Although Maastricht debt is expressed in currency units, for international comparison purposes it is often expressed as a percentage of gross domestic product (GDP).

Why is government debt important?

Government debt is one of the key macroeconomic indicators used to assess public finances. 

The Member States of the European Union have agreed to observe budgetary discipline by respecting certain criteria, including a debt-to-GDP ratio not exceeding the reference value of 60%. These criteria are set out in the Protocol to the Treaty on the European Union on the excessive deficit procedure (EDP). According to current legislation, EU countries are required to report EDP-related data to Eurostat twice per year, at end-March and end-September. The data are then analysed and validated by Eurostat.

Contingent liabilities

Under certain circumstances, the government can provide economic aid to other units without triggering any immediate liabilities. These “contingent liabilities” refer to potential obligations that may arise depending on the outcome of a future event. These liabilities are uncertain in nature – either because it is unclear whether they will materialise or because their exact amount cannot be determined in advance. 

Although contingent liabilities are not recorded in the core government accounts, they may become actual government liabilities under certain conditions. These data are important for policy and analysis as they make public finances more transparent by providing a more complete picture of the potential impact on Member States’ financial positions. 

Eurostat collects data on various types of contingent liabilities, including government guarantees, the liabilities of government-controlled entities outside general government (public corporations) and liabilities related to off-balance public-private partnerships. Government non-performing loans could also entail a loss for governments if they are not repaid.

Unfunded pay-as-you-go pension scheme liabilities managed by general government are classed as implicit contingent liabilities. 

 

Related explainers

What is the general government balance?

What is the (net) borrowing requirement of general government?