World Debt Figures 2015 : Chapter 5

Debt in the North

23 February 2015 by Eric Toussaint , Daniel Munevar , Pierre Gottiniaux , Antonio Sanabria

Until 2008, countries in the North seemed untouched by debt problems. |1| The crisis has completely changed this situation. Now, in particular Ireland, Greece, Portugal, and Eastern and Central European countries are feeling the devastating effects of the austerity policies applied since the 1980s.

5.1. Debt in Europe

5.1.1. Trends in public and private debt

Table 5.1 – Trends in public and private debt (% of GDP GDP
Gross Domestic Product
Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another.
), from 2009 to 2013: ‘euro zone’ |2|

Eurozone 2009 2011 2013
Debt of the public administrations 80 87 92
Private sector debt (not including financial corporation debt) 170 168 168
Financial corporation debt 213 250 258
Debt of the public administrations 54 69 88
Private sector debt 226 221 205
>Household debt 86 83 81
>Private sector debt 140 138 124
Financial corporation debt 260 289 277
Debt of the public administrations 84 108 127
Private sector debt 252 255 257
>Household debt 96 93 91
>Private sector debt 156 162 166
Financial corporation debt 179 230 216
Debt of the public administrations 130 170 161
Private sector debt 123 129 129
>Household debt 53 63 64
>Private sector debt 70 66 65
Financial corporation debt 138 131 127

Contrary to the declarations made by European leaders and the mainstream press, which contend that States’ debts are too high because of insufficient control of social spending, the increase in European public debt occurred after private organisations (principally businesses and banks) had become overly indebted. The causes of this excessive debt include:

5.1.2. The cost of bailing out the banks

Table 5.2 gives the total volume of bail-outs, assistance, and guarantees Guarantees Acts that provide a creditor with security in complement to the debtor’s commitment. A distinction is made between real guarantees (lien, pledge, mortgage, prior charge) and personal guarantees (surety, aval, letter of intent, independent guarantee). to banks made by government authorities between 2008 and 2012. The sums in the guarantees column are not expenditures, they are State guarantees. Should the concerned assets lose their value, the State will cover the losses. They are not immediate costs, but potential future losses.

Table 5.2 – Direct public assistance to banks (from 2008 to 2012, in % of GDP) and State guarantees (in 2013, € billion): European Union |4|

Country Direct public aid to banks ($ billion) Direct public aid to banks (% of GDP) Public guarantees to banks ($ billion) Public guarantees to banks (% of GDP)
Ireland 63,0 38,4 66,4 40,5
Greece 35,1 19,3 73,7 28,1
Cyprus 1,7 10,1 6,7 6,1
Belgium 23,72 6,2 155,0 11,9
Spain 58,3 5,7 414,3 9,3
Denmark 11,0 4,4 100,8 0,5
UK 80,0 4,3 ...
Portugal 6,8 4,1 67,1 9,9
Netherlands 18,7 3,1 244,1 2,7
Austria 9,4 3,0 126,8 2,4
Germany 65,7 2,4 1108,7 1,8
France 24,7 1,2 834,2 3,3
Italy 6,2 0,4 631,8 5,2
Total EU at 28 601,2 4,6 5292,8 3,9

Financial time bombs on those states’ accounts, not only the losses are socialised but also the risks

The UK is at the top of the list for public aid to banks (€80 billion), followed by Germany (€65.7 billion). However, the country that has the heaviest burden compared to the size of its economy is Ireland with 40% of GDP. Ireland is followed by Greece at 19%, Cyprus 10%, and Belgium |5| and Spain at around 6%.

Figures from 2013, the latest available, point to Spain as the country that has granted the highest total of guarantees (€95.1 billion), followed by Italy (€81.1 billion) and France (€65 billion). Nevertheless, Ireland and Greece remain the most heavily burdened by guarantees compared to the size of their economies (respectively 40% and 28%). These are financial time bombs on those states’ accounts, not only the losses are socialised but also the risks (in this case, banking risks).

5.1.3. Profits and losses of European banks

To balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. their budget deficits, European countries apply austerity programmes that bleed the population dry. At the same time as budget deficits are widening because of the large sums used to save the banks, the same banks are making big profits.

5.1.4. Financial systems and national economies

The deregulation of the financial system has enabled it to grow excessively over the last ten years. This expansion is a significant risk for European economies.

Table 5.3 – Profits of banks in the European Union (€ billion)

Country Banks’ assets in 2000 Banks’ assets in 2012 Banks’ assets in 2000 (as % GDP) Banks’ assets in 2012 (as % GDP)
Belgium 699 1 048 277 284
Germany 6 083 7 566 295 284
Ireland 418 998 399 609
Greece 207 409 150 211
Spain 1 152 3 884 183 377
France 3 736 6 810 259 335
Italy 1 718 2 849 150 182
Netherlands 1 148 2 688 275 449
Austria 527 1 163 253 317
Portugal 277 496 218 301
Total EU 22 600 35 471 245 374

5.1.5. Debt repayments and national budgets: the case of Spain

This table compares the total burden of debt servicing (repayments of interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. and the capital borrowed) in terms of GDP, to the percentage of public spending devoted to paying the interest on the debt. Both are compared to public education and health budgets for the same year.

Table 5.4 – Burden of public debt on Spanish GDP and the State budget from 2008 to 2012

% GDP% Total public spending
Debt servicing (principal + interêt)Budget for education Budget for health services Reimbursement interest on the debt Budget for education Budget for health services
2008 5,3 4,6 6,1 3,9 11,1 14,7
2010 7,3 4,9 6,7 4,2 10,7 14,3
2012 8,2 4,5 6,2 6,4 9,4 12,9

We see that in 2008, debt servicing, as a percentage of GDP, was already higher than spending on health and education. Debt servicing continued to be higher than health spending in 2010. Since 2009 and the crisis, the Spanish health and education budgets have been cut each year. Between 2009 and 2011, spending on health dropped by 11% and on education by 13%. At the same time, the share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. of the budget allocated to the repayment of interest on debt continued to rise, doubling between 2008 and 2012. Even before the 2011 |8| constitutional amendment that established debt repayment as the top priority, taking precedence over all others, that priority was already the standard practice.

5.1.6. Illegitimate debt

The sense of injustice caused by the public bail-out of the banks has led to the formation of various social movements calling for public and democratic audits of public debt. |9| These audits under popular control seek to identify the part of public debt that is illegitimate, with a view to cancelling it. According to the CADTM, it is up to the authorities to take sovereign measures concerning illegitimate or illegal debts: there must be a firm, unilateral refusal to pay.

Certain debts, although legal from a judicial point of view can nevertheless be considered as illegitimate. The debt imposed on Greece, Ireland and Portugal by the ‘Troika Troika Troika: IMF, European Commission and European Central Bank, which together impose austerity measures through the conditions tied to loans to countries in difficulty.

’ (European Commission, ECB and IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
) through bail-outs fall into this category. Several factors point to the illegitimate nature of these debts incurred by governments under orders from the Troika: the measures have seriously damaged and attacked social and fundamental human rights; the people were not consulted about the policy changes that were made; finally, although at lower than market rates, they are still beyond the financial capacities of the people. For the CADTM, they are illegitimate debts and should be abolished.

The outcome of the structural adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

policies applied to Greece are dramatic. |10| The following table compares the country’s principal macro-economic variables between the first quarters of the years 2008 and 2014.

Table 5.6 – Principal Greek economic indicators compared by first quarter 2008 and 2014

2008-1st quarter2014-1st quarterDifference in %
Economic indicators (€ millions)
GDP 54 296 41 272 -24,0 %
Household spending 42 245 32 640 -22,7 %
Revenues 18 468 11 885 -35,6 %
Investissements 12 626 5 114 -59,5 %
Home building 5 044 679 -86,5 %
Active popuation (+ 15 years old) in thousands
Total active population 4 986 4 826 -3,2 %(160.000)
Actively employed 4 567 3 484 -23,7 %(1.083.000)
Unemployed 419 1 342 +220,0 %(+ 923.000)
% of unemployed 8,4 % 27,8 % +231,0 %

In addition, in 2009 there were well over 950,000 people working in different public sectors. In December 2013, this number had dropped to 675,500, and in May 2014 it was no more than 590,900. Total wages dropped from €24.5 billion to €15.8 billion between 2009 and 2013. The brunt of this loss was taken by non-permanent employees, which fell from 148,600 in 2009 to only 12,200 in 2013. |12|

This huge drop, justified by accusations that civil servants were paid for doing nothing, was caused by the non-replacement of employees who retired, as well as by increased unemployment; again, for non-permanent ex-employees. Many public services are paralysed and those that continue to function, such as education, lack resources, and are doing no more than ticking over.

Another example of what could be considered illegitimate debt is the indebtedness caused by prohibiting central banks from lending directly to public authorities. As they cannot be financed by central banks, States have to seek funds on the financial markets where they issue sovereign bonds that are principally purchased by private banks. |13| This private monopoly de-legitimises a large proportion of public debt.

Likewise, Olivier Bonfond, economist at CADTM and CEPAG, has calculated the surcharge paid by the Belgian State in order to find funds on the financial markets. His graph below plots different curves: the dark blue line shows the debt trend as it actually happened. Between 1992 and 2012, Belgian debt was reduced to 100% of GDP from 135% of GDP. The other lines show that public debt would have been much lower if Belgium had been able to borrow from its central bank. The light blue line shows that if Belgium had borrowed at 1% from the Central bank, its debt would have been at 34% of GDP in 2012. In this case, Belgium would have saved €248 billion during this period. The orange line shows the same scenario, but at 0% interest rate. Belgian debt would have dropped from 135% of GDP in 1992 to 18% of GDP in 2012, and Belgium would have saved €306 billion. This graph clearly shows that a considerable proportion of Belgian public debt is illegitimate.

Chart 5.2 – Belgian debt trend as a % of GDP in function of lending rates from 1992 to 2012

X2 = Financial markets rate
X7 = Financial markets rate and ECB rate (savings: €90 Bn)
X6 = Rate = inflation Inflation The cumulated rise of prices as a whole (e.g. a rise in the price of petroleum, eventually leading to a rise in salaries, then to the rise of other prices, etc.). Inflation implies a fall in the value of money since, as time goes by, larger sums are required to purchase particular items. This is the reason why corporate-driven policies seek to keep inflation down. and ECB rate (savings: €171 Bn)
X5 = Rate = inflation (savings: €186 Bn)
X4 = Rate = 1 % (savings : €248 Bn)
X3 = Rate = 0 % (savings: €306 Bn)

Belgian national debt is very largely illegitimate

What is more, if tax breaks to the richest 1% and to big business are taken into account, together with the costs of bank bail-outs, it is clear that Belgian national debt is very largely illegitimate.

In France, the Citizens’ Audit Collective (CAC) published a report in May showing that 59% of France’s public debt, €1.097 trillion in 2014, is illegitimate. The report is based on two major factors: the continuing payment of past debt (snowball effect), 59% of France’s public debt, €1.097 trillion in 2014, is illegitimategiven that the interest rates Interest rates When A lends money to B, B repays the amount lent by A (the capital) as well as a supplementary sum known as interest, so that A has an interest in agreeing to this financial operation. The interest is determined by the interest rate, which may be high or low. To take a very simple example: if A borrows 100 million dollars for 10 years at a fixed interest rate of 5%, the first year he will repay a tenth of the capital initially borrowed (10 million dollars) plus 5% of the capital owed, i.e. 5 million dollars, that is a total of 15 million dollars. In the second year, he will again repay 10% of the capital borrowed, but the 5% now only applies to the remaining 90 million dollars still due, i.e. 4.5 million dollars, or a total of 14.5 million dollars. And so on, until the tenth year when he will repay the last 10 million dollars, plus 5% of that remaining 10 million dollars, i.e. 0.5 million dollars, giving a total of 10.5 million dollars. Over 10 years, the total amount repaid will come to 127.5 million dollars. The repayment of the capital is not usually made in equal instalments. In the initial years, the repayment concerns mainly the interest, and the proportion of capital repaid increases over the years. In this case, if repayments are stopped, the capital still due is higher…

The nominal interest rate is the rate at which the loan is contracted. The real interest rate is the nominal rate reduced by the rate of inflation.
are excessive, and the tax breaks to the wealthiest and to big business. The following chart, taken from this report, shows the amount of debt generated by these two factors.

Chart 5.3: Proportion of French debt caused by the snowball effect and tax breaks (as a % of GDP, 1985-2013) |15|

CaptionUpper line: Actual debtMiddle line: Probable debt levels with no tax breaksLower line: Probable debt levels without neither the tax breaks nor the ‘snowball effect’

5.2. US debt

Although the US is at the centre of the world economy, or perhaps for this reason, it has not been spared from uncontrolled growth in public and private debt. Households and individuals have been severely affected.

5.2.1. Trends in public and private US debt

Table 5.6 – Evolution of public and private US debt by sector (as a % of GDP), from 1980 to 2012: United States |16|

Sector 1980 1990 2000 2008 2012
Households 49 65 72 100 83
Non-financial companies 53 58 63 75 81
Financial corporation debt 18 44 87 119 89
State 35 54 47 55 93

5.2.2. The cost of bank bail-outs

Table 5.7 – The cost of bank bail-outs between 2008 and 2013 ($ billion): United States |17|

ProgrammeNet fundingGuarantees
Troubled Asset Asset Something belonging to an individual or a business that has value or the power to earn money (FT). The opposite of assets are liabilities, that is the part of the balance sheet reflecting a company’s resources (the capital contributed by the partners, provisions for contingencies and charges, as well as the outstanding debts). Relief Program (TARP) 167 -
US Treasury (non TARP) 510 4 071
Federal Reserve FED
Federal Reserve
Officially, Federal Reserve System, is the United States’ central bank created in 1913 by the ’Federal Reserve Act’, also called the ’Owen-Glass Act’, after a series of banking crises, particularly the ’Bank Panic’ of 1907.

FED – decentralized central bank :
Board (non TARP)
2 632 2 018
Federal Deposit Insurance Corporation (non TARP) 0 2 475
Other (non TARP) 17 7 621
Total 3 326 16 184

This table shows the various bank bail-out programmes in the US between 2008 and 2013, the first being the Troubled Asset Relief Programme (TARP) approved by G. W. Bush in October 2008.

Net assistance is the difference between the public funds injected into the programmes and the funds returned from the programmes. The positive figures are the funds injected that have not been returned. The guarantees are public guarantees of bank assets.

5.2.3. US bank balance sheets

We might have imagined that following the 2008 crisis, US financial institutions would suffer severe losses... not at all! Thanks to public funds they were rapidly back on their feet and once again enjoying high profits.

Table 5.4

5.2.4. The property crisis

Where is the bail-out plan for these people to satisfy their basic right to housing?

While the banks were ‘still getting away with it’ thanks to public and central bank assistance, the plights of millions of US families, like hundreds of thousands in Spain, have been ignored by their government. Since 2005, an estimated 14 million US families have been evicted, and over 260,000 families in Spain suffered the same fate between 2008 and 2012. Where is the bail-out plan for these people that would enable them to satisfy their basic right to housing?

Table 5.8 – Number of evictions after repossessions of homes in the US and Spain from 2005 to 2012 |19|

USA Spain
2005 532 833 -
2006 717 522 -
2007 1 285 873 -
2008 2 330 483 17 433
2009 2 824 674 22 493
2010 2 871 891 32 689
2011 1 887 777 40 740
2012* 1 836 634 147 442
Total 14 287 687 260 797

*The 2012 figure includes evictions by court rulings

Manifestation contre la Troïka en Espagne le 1er juin 2013. « STOP EXPULSIONS »


|1| In the introduction, we saw that during the 1980s a number of European countries endured a largely forgotten debt crisis. The city of New York was also hit by a debt crisis at the turn of the 1980s (Harvey, David. A Brief History of Neoliberalism and Graeber, David. Debt: The First 5000 Years) as were European cities such as Liverpool in the UK and Antwerp and Liege in Belgium. Concerning Liege, see : ACiDe (Audit citoyen de la dette) / Collectif ACiDe liégeois, Aux origines de la dette de la ville de Liège, 21 July 2014, (French)

|2| Banks’ debts include all declared liabilities.

Non-financial corporations: all private companies that are not financial companies, from Tesco, Unilever, Ford, BP, and Arcelor-Mittal to Cross & Blackwell or Radio Luxembourg. Private financial companies are mainly banks, insurance companies, pension funds or investment funds.
Sources:European Central Bank (ECB), Statistics Pocket Book, Frankfurt, October 2013,; and (ECB), Consolidated Banking Data, 2013,

|3| The question of illegitimate debt caused by prohibiting the central banks from lending to public authorities is presented in 5.1.6.

|4| The figures in the direct public aid column do not include guarantees (mentioned in the public guarantees column) or ECB lines of credit.
GDP data from: European Commission/ Eurostat,
Tableaux complémentaires relatifs à la crise financière, 2007-2012, April 2014, (French) From Manzano, Daniel La banca euroea y su recapitalización pública, El País, 17 September 2014. Available at (Spanish).
Guarantee data from: European Commission, Overview of decisions and on-going in-depth investigations in the context of the financial crisis, MEMO/14/507, 13 August 2014.

|5| CADTM has calculated a figure for Belgium considerably higher than the one mentioned in Table 5.2. Our figure is €32.6 billion, 8.5% of GDP, higher than the official figure of €23.7 billion. The CADTM calculations are based on figures from SFP finance and the Belgian national audit office, and are as follows (€ billion): bail-out of Dexia (8.9) + Fortis (15.2) + KBC (7) + Ethias (1.5) = €32,6 billion. In the case of Belgium, and certainly in other cases as well, official figures underestimate the real value of public aid to banks.

Concerning debt linked to bank bail-outs see: Cravatte, Jérémie. Pourquoi la dette liée aux sauvetages bancaires est-elle illégitime?, CADTM, 3 September 2013, (French).

|6| Source: ECB, Consolidated Banking Data, 2013,

|7| Source: Spanish Minister of Finance and Public Administration 2013; and Contabilidad nacional, 2013; both available here (Spanish)

|8| Article 135 of the Spanish Constitution was modified after agreement between the two principal political parties, the Popular Party (conservative) and the PSOE (socialist), the latter had previously proposed the same reform in August 2011. The constitutional amendment was passed (as in Italy) without a consultative referendum.

|9| Many of these groups are united under the ICAN (International Citizen debt Audit Network banner. In addition to European organisations, there are also Tunisian and Egyptian groups.

|10| On the unpayable Greek public debt and the need to reduce it, see Munevar, Daniel & Lapavitsas, Costas. Greece needs a deep debt write off, 6 June 2014,

|11| M.G. Deprettaki, from figures published by the Greek National Statistics Institute (ELSTAT), which appeared in an article published in EFSYN 2 July 2014.
For more information: Deprettaki, M.G. La situation en Grèce après 4 ans de mémoranda, 7 May 2014, (in French and Greek).

|12| From the article Assessment? No thanks!, in the Greek newspaper Efimerida ton Syntakton, 25 August 2014, Based on figures from the Ministry of Administrative Reform.

|13| Central Bank lending to States is prohibited in the Eurozone by article 21.1 of the ECB statutes, in the US by section 14 (b) of the Federal Reserve Act, in Japan by article 5 of the public finance law. For the Bank of England and other EU central banks (including those not affiliated to eurozone) this method of funding is prohibited by Article 123 of the Lisbon Treaty, which confirms articles already existing in the 1992 Maastricht Treaty.

|14| Source: calculated by Olivier Bonfond using National bank of Belgium (BNB) figures.

|15| Source: Citizen’s Public debt Audit Collective (CAC), Que faire de la dette ? Un audit de la dette publique de la France (What is to be done about the debt? An audit of France’s public debt), France, May 2014; Based on Figures from INSEE, national statistics office, France. (

|16| Source: Federal Reserve of the United States: Flow of Funds Federal Reserve, 25 September 2013; and Flow of Funds Matrix, 2012.
National debt includes both Federal and other government debt.

|17| Source: US Federal Bailout:

|18| Source: Federal Reserve Bank of St Louis.

|19| Source: Plataforma de Afectados por la Hipoteca (PAH) [Mortgage Victims’ Platform]: RealtyTrac Foreclosure Market Report, 2012; Informe 2013.


Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France. He is the author of Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012 (see here), etc. See his bibliography: He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. Since the 4th April 2015 he is the scientific coordinator of the Greek Truth Commission on Public Debt.


Daniel Munevar

is a 30-year-old post-Keynesian economist from Bogotá, Colombia. MPAff. LBJ School of Public Affairs at the University of Texas at Austin. From March to July 2015 he worked as a close aide to former Greek finance minister Yanis Varoufakis, advising him on issues of fiscal policy and debt sustainability. He was previously fiscal advisor to the Ministry of Finance of Colombia and special advisor on Foreign Direct Investment for the Ministry of Foreign Affairs of Ecuador. He is considered to be one of the foremost figures in the study of Latin American public debt. He is member of CADTM AYNA.

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