COMMISSION STAFF WORKING PAPER Analysis by the Commission services of the action taken  by Cyprus  in response to the Council Recommendation of 13 July 2010 with a view to bringing an end to the situation of excessive government deficit    COM(2011) 22 final SEC(2011) 113 final SEC(2011) 115 final SEC(2011) 116 final
Date: 2011-01-27
Institutions: European Commission
Subjects: Cyprus, budget deficit, budget policy, budgetary control, economic analysis, economic recession, public debt, public expenditure, reflation, stability programme

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EUROPEAN COMMISSION 

Brussels, 27.1.2011 
SEC(2011) 114 final 

COMMISSION STAFF WORKING PAPER 

Analysis by the Commission services of the action taken 

by Cyprus 

in response to the Council Recommendation of 13 July 2010 with a view to bringing an 
end to the situation of excessive government deficit 

COM(2011) 22 final 
SEC(2011) 113 final 
SEC(2011) 115 final 
SEC(2011) 116 final 

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COMMISSION STAFF WORKING PAPER 

Analysis by the Commission services of the action taken 

by Cyprus 

in response to the Council Recommendation of 13 July 2010 with a view to bringing an 
end to the situation of excessive government deficit  

1. 

INTRODUCTION 

According  to  the  April  2010  EDP  notification,  the  general  government  deficit  in  Cyprus 
reached 6.1% of GDP in 2009 from a surplus of 0.9% in 2008. This was a result of a severe 
economic downturn and discretionary measures in response to the economic downturn (in line 
with the EERP) but also of rather large composition effects on account of a much less tax-rich 
GDP growth pattern. In parallel, the general government gross debt stood at 56.2% of GDP, 
below the 60% of GDP reference value but on a rising trend. Against this background, on 13 
that  an  excessive  deficit  existed  and  addressed 
July  2010, 
recommendations to Cyprus in accordance with Article 126(7) TFEU with a view to bringing 
an end to the situation of an excessive government deficit by 2012.1 In its recommendations, 
the Council established a deadline of 13 January 2011 for effective action to be taken. 

the  Council  decided 

The  Council  recommended  to  Cyprus  to  bring  the  general  government  deficit  below  3%  of 
GDP  in  a  credible  and  sustainable  manner  by  taking  action  in  a  medium-term  framework. 
Specifically,  to  this  end,  Cyprus  should:  (a)  take  necessary  measures  to  reduce  the  2010 
deficit  to  at  most  6%  of  GDP  and  define  an  expenditure-driven  consolidation  strategy,  in 
order to bring the deficit below the reference value by 2012; (b) to this end ensure an average 
annual fiscal effort of at least 1½  % of  GDP over the period 2011-2012, which should also 
contribute  to  bringing  the  government  gross  debt  ratio  back  on  a  declining  path  that 
approaches  the  reference  value  at  a  satisfactory  pace  by  restoring  an  adequate  level  of  the 
primary surplus; and (c) specify and rigorously implement the measures that are necessary to 
achieve  the  correction  of  the  excessive  deficit  by  2012,  cyclical  conditions  permitting,  and 
accelerate the reduction of the deficit if economic or budgetary conditions turn out better than 
currently expected.  

To  limit  risks  to  the  adjustment,  a  strengthening  of  the  binding  nature  of  Cyprus’  medium-
term  budgetary  framework  and  better  monitoring  of  budget  execution  throughout  the  year 
were  requested.  In  addition,  the  Cyprus  was  recommended  to  improve  the  long-term 
sustainability  of  public  finances  by  implementing  reform  measures  to  control  pension  and 
health  care  expenditure  in  order  to  curb  the  projected  increase  in  age-related  expenditure. 
Finally, Cyprus was recommended to seize any opportunity beyond the fiscal effort, including 
from  better  economic  conditions,  to  accelerate  the  reduction  of  the  gross  debt  ratio  back 
towards the 60% of GDP reference value.  

This  paper  reviews  the  actions  taken  by  Cyprus  to  meet  the  aforementioned  Council 
recommendations,  in  light  of  the  economic  and  budgetary  developments.  In  particular,  it 

1 

All EDP-related documents for Cyprus can be found at the following website: 
http://ec.europa.eu/economy_finance/sgp/deficit/countries/cyprus_en.htm  

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reviews the budgetary implementation in 2010 and the prospects for 2011, on the basis of the 
Commission services’ autumn 2010 forecast, the 2011 Budget Law, voted by the Parliament 
on 16 December 2010, as well as additional consolidation measures adopted by Cyprus.  

2. 

ECONOMIC DEVELOPMENTS 

The  global  economic  and  financial  crisis  hit  Cyprus  through  a  slump  in  external  demand. 
After five quarters of contracting economic activity which led to a contraction of real GDP, 
for the first time in 35 years, by 1.7% in 2009, compared to 4.1% for the euro-area average, 
the  first  three  quarters  of  2010  witnessed  a  stronger-than-expected  rebound  of  economic 
activity.  The  Commission  services'  autumn  2010  forecast  expects  real  GDP  in  2010  as  a 
whole to expand by 0.5%. The economic recovery that started in 2010 is set to continue into 
2011  and  to  gain  momentum  in  2012.  Real  GDP  is  projected  to  grow  by  1.5%  and  2.2% 
respectively, while the composition of growth is set to follow a more balanced pattern.  

The  macroeconomic  outlook  for  the  Cypriot  economy  for  the  period  2010-11  has 
progressively  improved  since  the  publication  of  the  Commission  services'  spring  2010 
forecast underpinning the Council recommendations of 13 July 2010 (Table 1). The national 
authorities have revised their economic projections only slightly upwards during the course of 
the year: in the stability programme update of April 2010, economic activity was expected to 
expand by 0.5% and 1.5% in 2010 and 2011, respectively. These were also the underlying real 
GDP  growth  projections  of  the  2011  budget.  Currently,  the  national  authorities  project 
economic  activity  to  expand  by  ½-1%  in  2010  and  1½-2%  in  2011.  The  main  factor 
contributing  to  the  improved  economic  outlook,  despite  the  deteriorated  performance  of 
domestic  demand  in  2010,  is  net  exports.  Although  the  adjustment  of  growth  to  a  more 
balanced composition pattern is a positive development, on the other hand, being less tax-rich 
could pose a challenge on the fiscal consolidation efforts.  

Table 1: Comparison of macroeconomic developments and forecasts 

2009 
outturn COM SF10 COM AF10 COM SF10  COM AF10

2011 

2010 

Real GDP (% change) 
Contributions to real GDP growth: 
  Domestic demand (excl. inventories)
  Changes in inventories 
  Net exports 
Employment (% change) 
GDP deflator (% change) 

-1.7 

-0.4 

-3.7 
-4.1 
5.8 
-0.7 
0.0 

-3.2 
1.8 
0.9 
-0.7 
2.1 

0.5 

-3.7 
1.8 
2.4 
-0.9 
2.5 

1.3 

1.1 
0.0 
0.3 
-0.2 
2.4 

1.5 

1.0 
0.0 
0.5 
0.2 
3.2 

Source : COM SF10 - Commission services' spring 2010 forecast; COM AF10 - Commission services' autumn 2010 forecast.  

3. 

BUDGETARY IMPLEMENTATION IN 2010 

The Commission services' autumn 2010 forecasts, on the basis of available information at the 
time - including the draft budget, estimated that the budget deficit appeared to have stabilised 
in  2010  at  a  level  similar  to  the  previous  year,  at  5.9%  of  GDP,  as  a  marginal  increase  in 
revenues appeared to have been fully offset by a  rise in  expenditures. On the one hand, the 
slowdown  of  activity  and  reduced  corporate  profitability  appear  to  have  weighed  on  tax 
receipts. In particular, direct tax revenues declined further, dragged down by lower income-
tax receipts. Indirect taxes posted only marginal growth as a rise in import duties and excise 

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taxes, which benefited from the increase of the excise duty on petrol as of 1 July due to the 
derogation expiration, was largely offset by a fall in VAT receipts. Social contributions posted 
positive growth, benefiting from the full- year impact of the rise of contribution rates adopted 
in the first half of the 2009. On the other hand, current expenditure continued to rise, despite 
the fall in interest payments, on the back of increases in the public wage bill, social outlays 
and subsidies. Given that revenues benefited from a one-off factor of almost ¾ pp. of GDP, 
associated with the profit on an interest swap agreement and a transfer of higher-than-usual 
Central  Bank  profits,  the  budgetary  outcome  could  have  been  worse  on  the  basis  of 
underlying fiscal trends.  

Moreover,  recently  published  cash  data  of  the  consolidated  accounts  of  the  central 
government  and  administered  funds  for  the  period  January  –  November  2010  appear  to 
support  and  even  better  outturn  for  2010,  at  about  5.5%  of  GDP.  In  particular,  cash  data 
demonstrates  a  reduction  of  the  deficit  to  2.44%  of  GDP  for  central  government  and 
administered funds compared with 2.97% over the same period of 2009, an improvement by 
0.5 percentage points.  

4. 

PROJECTED BUDGETARY DEVELOPMENTS IN 2011 AND 2012 

On the basis of the 2011 draft budget available at the time, the Commission services' autumn 
2010 forecast2 projected a deficit of 5.7% of GDP for 2011.  

For  2011,  the  Budget  Law3  targets  a  deficit  of  5.4%  of  GDP,  on  the  basis  of  an  estimated 
deficit for 2010 of just below 6% of GDP. This budgetary target is lower than that set in last 
April’s update of the stability programme, of 4.5% of GDP. On the revenue side, the budget 
does  not  incorporate  any  additional  measures,  apart  from  the  phasing-out  of  the  tax-relief, 
which was part of the stimulus measures and the harmonisation of excise duties on petroleum 
products, in effect since last July. Nevertheless, these effects are partly offset by a reduction 
in  other  current  revenues.  On  the  expenditure  side,  the  budget  aims  at  savings  through  a 
reduction  of  operational  expenditure,  as  well  as  restraint  in  public  investment  and 
employment.  However,  these  elements  are  fully  offset  by  a  rise  in  the  public  wage  bill, 
interest  payments  and  in  social  outlays.  Compared  to  the  draft  budget,  the  Commission 
services’ forecast incorporates a more prudent assessment of revenue prospects, given a less 
tax-rich growth composition, and on the expenditure side, given past trends on key items such 
as the wage bill and social transfers. 

After the autumn forecast, Cyprus adopted a fiscal consolidation package in tandem with the 
adoption  of  the  Budget,  which  consists  of  measures  on  both  the  revenue  and  expenditures 
sides. As explained in the letter sent by Minister of Finance Stavrakis to Commissioner Rehn 
on  7  January  2011,  the  authorities  estimate  the  consolidation  arising  from  this  package  at  1 
percentage point (pp.) of GDP, out of which 0.6 pp. of GDP are on the revenue side and of 
permanent nature. In particular, these include the introduction of 5% VAT on foodstuffs and 
pharmaceutical products as of January 2011 (0.3% of GDP), in line with the EU acquis and 
the increase of excise duties on cigarettes and tobacco products by 30% (0.3% of GDP). On 
the  expenditure  side,  the  authorities  plan  to  make  savings  through  cuts  in  operating 

2 

3 

The Commission services autumn 2010 forecasts were published on 29 November 2010. The data cut-
off date was 15 November 2010. 
The 2011 Budget Law was adopted by the Parliament on 16 December 2010. 

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expenditure  (0.25%  of  GDP)  and  through  reduction  of  the  size  of  civil  service  by  1000 
persons annually (0.15% of GDP). 

In addition, the coalition parties have agreed on an additional set of measures, which will be 
submitted to the Parliament for approval in February 2011. This is estimated by the authorities 
to yield an additional 0.6 p.p. of GDP of consolidation in 2011, from both revenue supporting 
and  expenditure  containing  measures.  In  particular,  it  includes  the  harmonisation  of  water 
consumption  tariffs  in  line  with  the  EU  acquis  (0.05%  of  GDP),  levies  on  the  deposits  of 
banks for two years, subject to a minimum profitability (0.35% of GDP) and wage moderation 
in the public sector (0.2% of GDP). 

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Table 2: Composition of the budgetary adjustment 

2009 

2010 

2011 

2012 

SP 
Apr 
2010 

41.6 

Budget 
2011 

COM 
AF2010 

40.2 

40.2 

SP 
Apr 
2010 

42.8 

Budget 
2011 

COM 
AF2010 

COM 
AF20103 

40.8 

40.4 

40.5 

(% of GDP) 

Revenue 

of which: 

-  Taxes  on  production  and 

imports 

-  Current  taxes  on  income, 

wealth, etc. 

- Social contributions 

- Other (residual) 

Expenditure 

of which: 

SP 
Apr 
2010 

40.3 

15.0 

11.2 

9.3 

4.8 

outturn 

39.8 

15.1 

11.2 

8.6 

4.9 

15.5 

15.1 

11.6 

10.7 

9.6 

4.9 

8.9 

5.5 

15.1 

10.7 

8.9 

5.5 

16.1 

15.5 

12.1 

11.0 

9.7 

4.9 

9.2 

5.0 

15.7 

10.8 

8.9 

5.0 

15.8 

10.8 

8.8 

5.0 

46.2 

46.4 

45.8 

47.6 

46.2 

46.2 

47.2 

46.1 

46.2 

- Primary expenditure 

43.9 

43.2 

45.3 

43.9 

43.9 

44.8 

43.7 

43.8 

43.7 

of which: 

Compensation 

of 

employees 

Intermediate 

consumption 

15.6 

15.6 

15.8 

15.9 

5.6 

5.6 

5.6 

5.3 

Social payments 

13.8 

13.3 

14.4 

14.2 

Subsidies 

Gross 

fixed 

capital 

formation 

Other (residual) 

- Interest expenditure 

General 
balance (GGB) 

government 

Primary balance 

One-off 

and 
temporary measures 

GGB excl. one-offs 

Output gap1 

other 

Cyclically-adjusted balance1 

Structural balance2 
Change 

in 

structural 

balance 

Structural primary balance2 
structural 
in 
Change 
primary balance 

Memorandum Items 

Real GDP growth 

GDP deflator 

Nominal GDP 

Notes: 

0.1 

4.1 

4.7 

2.5 

-6.1 

-3.6 

0.0 

-6.1 

-1.3 

-5.6 

-5.6 

-5.4 

-3.1 

-5.7 

-1.7 

0.0 

-1.7 

0.2 

4.1 

4.4 

2.5 

-6.0 

-3.4 

0.7 

-6.6 

-1.2 

-5.5 

-5.7 

-5.4 

-3.2 

-5.7 

-1.7 

-1.7 

0.4 

4.1 

5.0 

2.3 

-6.0 

-3.7 

0.1 

-6.1 

-2.4 

-5.1 

-5.2 

0.4 

-2.9 

0.2 

0.5 

1.7 

2.2 

0.3 

3.9 

4.2 

2.3 

-5.9 

-3.6 

0.7 

-6.6 

n.a. 

n.a. 

n.a. 

n.a. 

n.a. 

n.a. 

0.5 

3.0 

3.5 

15.9 

5.3 

14.2 

0.3 

3.9 

4.2 

2.3 

-5.9 

-3.6 

0.7 

-6.6 

-2.2 

-5.1 

-5.7 

0.0 

-3.4 

-0.2 

% 

0.5 

2.5 

3.0 

15.9 

16.0 

5.6 

5.0 

14.9 

15.0 

0.4 

4.1 

4.1 

2.4 

-4.5 

-2.1 

0.1 

-4.6 

-2.5 

-3.5 

-3.6 

1.5 

-1.2 

1.6 

1.5 

2.0 

3.5 

0.4 

3.8 

3.6 

2.4 

-5.4 

-3.0 

0.0 

-5.4 

n.a. 

n.a. 

n.a. 

n.a. 

n.a. 

n.a. 

1.5 

2.5 

4.0 

16.1 

5.0 

15.1 

0.4 

3.7 

3.5 

2.4 

-5.7 

-3.3 

0.0 

-5.7 

-1.8 

-5.0 

-5.0 

0.7 

-2.6 

0.8 

1.5 

3.2 

4.7 

16.1 

5.0 

15.1 

0.4 

3.7 

3.5 

2.4 

-5.7 

-3.3 

0.0 

-5.7 

-0.7 

-5.4 

-5.4 

-0.4 

-3.0 

-0.4 

2.2 

2.5 

4.8 

1 Output gap (in % of potential GDP) and cyclically-adjusted balance according to the programme as recalculated by Commission services 
on the basis of the information in the programme. 
2 Structural (primary) balance = cyclically-adjusted (primary) balance excluding one-off and other temporary measures. 

3 On a no policy change basis. 

Source: 

Stability programme (SP) update, April 2010; Commission services’ autumn 2010 forecasts (COM); Commission services’ calculations 

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However,  despite  the  adopted  measures,  the  public  wage  bill  is  still  on  a  rising  trend.  This 
may  suggest  that  the  numerical  reduction  of  public  sector’s  employees  is  not  enough  to 
restrain  expenditure  on  this  field.  Also,  no  measures  have  been  adopted  to  target  social 
transfers, which have been on high growth rates in recent years. Together, the public wage bill 
and  social  outlays  account  for  about  ⅔  of  total  expenditure.  The  adopted  consolidation 
strategy does not address comprehensively these expenditure categories.  

The  Commission  services’  autumn  2010  forecast  does  not  incorporate  the  recently  adopted 
package of consolidation measures, as this was not available as at the data cut-off date. This 
forecast implies an improvement in the structural balance (the cyclically-adjusted balance net 
of one-off and other temporary measures) by ¾ pp. of GDP in 2011, after a neutral impact in 
2010. The adoption of the aforementioned fiscal consolidation package, taken at face value, 
would improve both the headline and the structural balance by a 1 percentage point of GDP. 
The  adoption  of  the  additional  set  of  pending  measures,  accounting  for  0.6  pp.  of  GDP  is 
expected to have a similar impact. Overall, the improvement of the headline and the structural 
balance  in  2011  would  be  around  2¼  pp.  of  GDP.  Benefiting  from  the  base-effect  of  the 
lower-than-expected deficit outturn in 2010 (by 0.4 percentage points of GDP),  the headline 
balance would thus be expected to amount to 3¾% of GDP in 2011.  

However,  the  Commission  services  see  risks  to  the  achievement  of  the  2011  deficit  target. 
These  are  mainly  stemming  from  the  standard  practise  of  adopting  supplementary  budgets 
during  the  course  of  the year.  Hitherto, this  implied  an  increase  in  current  expenditure,  beyond 
the intended reallocation of funds. Moreover, slippages in social transfers due to pressure to adopt 
measures  to  alleviate  the  impact  of  indirect  tax  rises,  especially  given  that  Cyprus  enters  an 
electoral  cycle,  pose  a  considerable  risk.  Furthermore,  the  impact  of  the  wage  indexation 
(COLA) on the public wage bill, in case of a higher-than-expected increase in inflation also due 
to aforementioned VAT rise, constitutes a non-negligible risk. Moreover, there are risks for the 
budgetary impact of announced yet not adopted consolidation measures due to pressures from 
affected parties. 

For 2012, the  authorities  plan  to reduce the deficit further, below the 3% of  GDP  reference 
value,  through  the  continuation  of  the  adopted  consolidation  measures.  Based  on  the 
customary no-policy-change assumption and without incorporating the announced package of 
consolidation measures, the Commission services' autumn 2010 forecast projected the deficit 
to stabilise as a percentage of GDP to the same levels as in 2011, at 5.7%. Nevertheless, in 
view of the base effect in 2011, from a lower-than-expected deficit in 2010 (0.4% of GDP), 
and  of  the  continuation  in  2012  of  the  adopted  consolidation  measures,  the  2012  budgetary 
deficit  would  also  be  expected  to  decline  by  1  pp.  of  GDP  and  by  an  additional  0.6  p.p., 
subject to Parliament’s approval of the additional consolidation measures. 

5. 

DEBT DEVELOPMENTS 

In  the  autumn  2010  forecast,  the  Commission  services  estimate  Cyprus’  gross  government 
debt-to-GDP ratio to increase to 65.2% by 2011. The main driver of this deterioration is the 
primary  deficit,  which  is  only  partly  offset  by  the  positive  impact  from  the  acceleration  of 
growth.  

In the 2011 budget, the Cypriot authorities project the government debt to deteriorate mildly 
and reach about 62% of GDP in 2010, from 58% in 2009. The positive impact of the projected 
growth in nominal GDP is more than offset by interest payments. Moreover, the existence of a 

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primary deficit weighs on the debt. For 2011, the authorities project a further increase in the 
debt ratio to 63.8%, due to the continuation of a primary deficit.  

The adoption of the fiscal consolidation package is expected to stabilise the debt-to-GDP-ratio 
in  2011  at  levels  similar  to  2010,  through  the  containment  of  the  primary  deficit.  The 
continuation  of  consolidation  measures  in  2012,  coupled  with  the  acceleration  of  growth, 
should contribute in reversing debt to a declining trend.  

Table 3: Debt Developments 

(% of GDP) 

2009 

2010 

2011 

Gross debt ratio1 
Change in the ratio 
Contributions2: 
1. Primary balance 
2. “Snow-ball” effect 
Of which: 
Interest expenditure 
Nominal GDP growth effect 

3. Stock-flow adjustment 
Of which: 
Cash/accruals diff. 
Acc. financial assets 
Privatisation 
Val. effect & residual 

Outturn 

58.0 

9.7 

3.4 
3.5 

2.5 
1.0 

2.8 

0.2 
2.6 
n.a. 
0.0 

SP Apr 
2010 
56.2 

SP Apr 
2010 
61.0 

Budget 
2011 
61.9 

COM 
AF10
62.2 

SP Apr 
2010 
63.2 

Budget 
2011 
63.8 

7.8 

3.6 
3.3 

2.5 
0.8 

0.9 

0.2 
0.7 
n.a. 
0.0 

4.8 

3.7 
1.1 

2.3 
-1.2 

0.0 

0.0 
0.0 
n.a. 
0.0 

3.9 

3.6 
0.3 

2.3 
-2.0 

0.0 

n.a. 
n.a. 
n.a. 
n.a. 

4.2 

3.6 
0.5 

2.3 
-1.7 

0.0 

n.a. 
n.a. 
n.a. 
n.a. 

2.2 

2.1 
0.4 

2.4 
-2.1 

-0.2 

0.0 
-0.1 
n.a. 
0.0 

1.9 

3.0 
0.0 

2.4 
-2.4 

-1.1 

n.a. 
n.a. 
n.a. 
n.a. 

COM 
AF10 
65.2 

3.0 

3.3 
-0.4 

2.4 
-2.8 

0.1 

n.a. 
n.a. 
n.a. 
n.a. 

Notes: 
1End of period. 
2The snow-ball effect captures the impact of interest expenditure on accumulated debt, as well as the impact of real GDP growth and 
inflation on the debt ratio (through the denominator). The stock-flow adjustment includes differences in cash and accrual accounting, 
accumulation of financial assets and valuation and other residual effects.  

Source: 
Stability programme (SP); Commission services’ spring 2010 forecasts (COM); Commission services’ calculations 

6. 

FISCAL  GOVERNANCE,  QUALITY  OF  THE  PUBLIC  FINANCES  AND  LONG-TERM 
SUSTAINABILITY 

The authorities have not outlined any specific measures to accelerate the implementation and 
to  strengthen  the  binding  nature  of  Cyprus’  three-year  medium-term  budgetary  framework 
(MTBF). The full implementation of the new budgeting framework is expected to cease the 
practise  of  adopting  supplementary  budgets  during  the  course  of  the  year,  which  has  hitherto 
implied an increase in current expenditure, beyond the intended reallocation of funds. A medium-
term  budgetary  framework,  as  noted  by  the  authorities,  is  expected  to lead  to  a  more  effective 
and efficient budgeting process, contributing to contain expenditure by ministry according to 
the  ceilings  set.  At  the  same  time,  the  new  budgeting  process  would  set  a  sound  basis  for 
reallocating expenditure in favour of growth enhancing activities consistent with the priorities 
set by the National Reform Programme. Furthermore, no independent institution is involved 
in the formulation of the macroeconomic assumptions underlying the budgetary projections.  

As regards reform measures to control pension and health care expenditure, the authorities are 
in the process of setting up negotiations with the public sector’s social partners with a view to 

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reform the public sector’s pensions. For this purpose, an independent actuarial firm has been 
appointed to assess the impact of the government pensions’ scheme on public finances. The 
preliminary  findings  of  this  study,  which  will  form  the  basis  of  dialogue  with  the  social 
partners,  are  expected  within  the  next  two  months.  In  this  framework  the  authorities  also 
envision  to  also  discuss  reforms  of  other  sector-related  issues,  such  as  the  public  sector’s 
wage structure and the wage indexation. 

Table 4: Comparison of key macroeconomic and budgetary projections 

2008 

2009 

2010 

2011 

Real GDP 
(% change) 

Output gap 
(% of potential GDP) 

General government balance 
(% of GDP) 

Primary balance 
(% of GDP) 

Cyclically-adjusted balance 
(% of GDP) 

Structural balance3 
(% of GDP) 

Government gross debt 
(% of GDP) 

Notes: 

COM  
CY 
SP 
COM2 
CY 
SP1 
COM 
CY 
SP 
COM 
CY 
SP 
COM 
CY 
SP1 
COM 
CY 
SP 
COM 

CY 

SP 

3.6 
3.6 
3.6 
3.1 
n.a. 

2.9 
0.9 
0.9 
0.9 
3.7 
3.7 
3.7 
-0.3 
n.a. 
-0.2 
-0.3 
n.a. 
-0.2 
48.3 

48.3 

48.4 

-1.7 
-1.7 
-1.7 
-1.2 
n.a. 

-1.3 
-6.0 
-6.0 
-6.1 
-3.4 
-3.4 
-3.6 
-5.5 
n.a. 
-5.6 
-5.7 
n.a. 
-5.6 
58.0 

58.0 

56.2 

0.5 
0.6 
0.5 
-2.2 
n.a. 

-2.4 
-5.9 
-5.9 
-6.0 
-3.6 
-3.6 
-3.7 
-5.1 
n.a. 
-5.1 
-5.7 
n.a. 
-5.2 
62.2 

61.9 

61.0 

1.5 
1.5 
1.5 
-1.8 
n.a. 

-2.5 
-5.7 
-5.4 
-4.5 
-3.3 
-3.0 
-2.1 
-5.0 
n.a. 
-3.5 
-5.0 
n.a. 
-3.6 
65.2 

63.8 

63.2 

1 Output gaps and cyclically-adjusted balances according to the programmes as recalculated 
by Commission services on the basis of the information in the programmes. 

2 Based on estimated potential growth of 2.5%, 1.5%, 1.1% and 1.1% respectively in the 
period 2009-2012 

3 Cyclically-adjusted balance excluding one-off and other temporary measures. One-off and 
other temporary measures are 0.3% of GDP in 2009 and 0.7% in 2010; all deficit-reducing.  

Source: 

April 2010 update of Stability programme (SP); Commission services’ autumn 2010 forecasts 
(COM); Commission services’ calculations 

EN 

9 

   EN