woensdag, 22 september 2010

By the end of 2011, the EMU debt is expected to be 406 billion euros.   

This equals 66 per cent of gross domestic product (GDP). By the end of 2009, the EMU debt stood at 348 billion euros (61 per cent of GDP), increasing to 382 billion euros by the end of 2010 (64 per cent of GDP).

The EMU debt is the total of all outstanding loans of the public sector; the State, the social funds and the local authorities (minus their mutual debt relationships).

State debt is the biggest part of the EMU debt (around 80 per cent). For 2011, state debt is estimated at 338 billion euros. By the end of 2009, state debt amounted to 282 billion euros and by the end of 2010 it is expected at 317 billion euros.

Total interest expenses will increase in 2011 because of the higher level of debt; however, the increase in interest expenses is mitigated by the relatively low interest rate levels. Interest expenses consist of interest on public debt and other paid interest, for example as a result of integrated resource management (ie inhouse borrowing and lending for Public Entities) also known as "central treasury banking"). The State also earns interest revenues from lending and from temporary investment of financial surpluses. Net interest expenses on State debt in 2011 are estimated at about 11.3 billion euros.

The objective to finance the State debt at the lowest possible interest expenses given an acceptable level of risk for the budget has been formulated since 2008 by means of a 7-year centred portfolio as a benchmark. The actual funding includes loans with various maturities (less than one year on the money markets and 3, 5, 10 and 30 years on the capital market). By means of interest rate swaps the interest rate risk is brought in line with the 7-year benchmark. The performance of the State debt vis-à-vis the benchmark is assessed on an annual basis. In principle, the framework for the management of interest rate risk is reviewed every four years. Due to a new government taking office and the considerably changed budgetary situation of the State, the review already commences in 2010, so as to enable the new Minister of Finance to decide on the risk management framework for the coming years.