Government Finance Statistics Statistical background, consequences

Government The governing body of a nation, state, or community. (Dictionary.com)

Goods and services for individuals  Housing  Health  Employment Goods and services for the community  International relations  Justice  Elections

General government in ESA Definition: The sector general government (S.13) includes all institutional units which are other non-market producers whose output is intended for individual and collective consumption, and mainly financed by compulsory payments made by units belonging to other sectors, and/or all institutional units principally engaged in the redistribution of national income and wealth.

Finance

Expenditure EU Largest share of expenditure: social transfers Average government expenditure per inhabitant: €

Revenue EU Taxes and social contributions together make up just over 90 % of government revenue. Average government revenue per inhabitant €

Deficit

Debt

More deficit

Maastricht Treaty: EDP Deficit/surplus = net lending / net borrowing of General Government 3% of GDP Debt = liabilities of GG in currency and deposits; securities other than shares, excluding financial derivatives and loans; at nominal value; consolidated. 60% of GDP

Statistics

EDP statistics Obtained by re-compiling primary public finance data, referred to as ‘upstream data’. Eurostat is legally required to provide the actual data within 3 weeks after the reporting deadline (press release). Eurostat may express a reservation on the quality of the data reported by Member States or amend the reported data if there is evidence that they do not comply with the requirements. The economic governance "6 pack" introduced the possibility of financial sanctions in case of deliberate misreporting of EDP statistics.

15 ESA95 tables Annual data Table 2 – Main aggregates Table 9 – Taxes and social contributions Table 11 – COFOG Expenditure by function Tables 6/7 – Annual Financial Accounts Quarterly data Table 25 – Non-financial accounts (QNFAGG) Table 27 – Financial accounts (QFAGG) Table 28 – Maastricht debt

European GFS Revenue – Expenditure Deficit Financing: transactions in financial assets and liabilities Other economic flows (revaluations – Other changes in volumes) Balance sheet (financial)

EDP vs ESA95 Deficit: Stream of interest payments on swaps and forward rate agreements –included in interest for the EDP procedure –excluded from interest in the framework of ESA 1995 Net lending ( + ) / net borrowing (-) in ESA ,409 Memo: Adjustment for swaps-574 Memo: Government deficit: Net lending ( + ) / net borrowing (-) under EDP -29,983 Debt: Valuation of the debt –ESA debt = market value, –EDP debt (a.k.a. Maastricht debt) = nominal value

Table 25 Table 27 Table 28 Timing of the transmissions March Table 25 Table 27 Table 28 June EDP Table 2 Table 25 Table 27 Table 28 September EDP Table 2 Table 9 Table 25 Table 27 Table 28 December Table 11

Some current issues

Delineation of general government

Sectors of government General government Central government State government Local government Social security funds

PT 84.4% IE 69.2% EL 138.5% IT 119.0% HU 81.7% DK 41.0% FR 82.8% UK 73.2% EE 9.1% PL 48.1% DE 47.2% ES 46.5% IT 119.0%

The ESFS raises money on the financial markets issuing bonds with the guarantee of MS. Main statistical issue: debt raised is the liability of whom?

ESFS: an international organisation? 1.Very restricted domain of activity and pre- determined list of tasks. 2.Need of ex-ante approval from government. 3.No unanimity rule for decision making. 4.No large number of staff. 5.No extra-territoriality privileges. 6.Limited liability company. 7.Set for very limited amount of time. 8.Capital of 30 mn €. NO

ESFS: a credit institution? Agreement says ”EFSF is not a credit institution” EFSF does not bear any risk No power of decision + initiative as regards its assets Cannot develop/enlarge its activities Also: no financial auxiliary Does not contribute to the realisation of financial transactions by financial intermediaries NO

ESFS: an institutional unit? Decision making power in the hands of MS Ex-ante approval of shareholders required for all sorts of decisions Cannot choose who will be beneficiaries of loans Cannot choose amounts to be lent So: cannot ”take economic decisions and engage in economic activities for which it is itself held to be directly responsible” NO

A treasury facility controlled and acting on behalf of Euro Area Member States.  Consolidation with each guarantor MS.  Each time EFSF borrows, the Maastricht debt of the MS increases to the extent of their share in the guarantee scheme.

European Stability Mechanism Planned to have: the status of an international organisation, a paid-in capital of 80 billion €, an 85% qualified majority decision making rule.  ESM borrowing will not impact EAMS deficit and debt statistics.

Pensions

Gov’t sponsored pension schemes Under ESA95: Pension liabilities: not recorded as a liability of the government; not part of the Maastricht debt. What happens when a corporation pays a lump sum to a government in exchange for the government taking over its future pension obligations? –the lump sum is recorded as deficit reducing (or surplus increasing).

Gov’t sponsored pension schemes Under ESA10 (after 2014): These lump sums will have no impact on deficit, being recorded as financial advances. This will significantly revise recent past deficits of some countries for certain years, including some of them quite significantly. No impact on the Maastricht debt, as pension obligations are excluded from its definition.

Questions?

Where to find the data Data Navigation Tree –Economy and Finance / Government data Statistics Explained –Statistical themes / Government finance General Government expenditure statistics, Government finance statistics, Integrated government finance statistics presentation, Structure of government debt, Tax revenue statistics Dedicated section –Statistics tab / Statistics by theme / Economy and Finance / Government finance statistics

Dedicated section on GFS Data –links to main tables and database –GFS tables: integrated presentation of government finance statistics Methodology –Manuals –Decisions for GFS –Guidance on accounting rules for EDP and GFS –Advice to Member States Legislation

Dedicated section on GFS Excessive Deficit Procedure –EDP Notification Tables –EDP Inventories sources and methods used for compiling the reported data list of the units included in each of the sub-sectors of general government –Eurostat EDP visits to Member States –Supplementary tables on financial turmoil Publications –Press releases, Statistics in focus,Quality reports, other publications.