Eurostat has just released the latest figures for public sector debt and interest payments. You can find all the details here. But, as usual, I have downloaded the most interesting information and put it in a Google Sheet that you can find here. And the key results are shown in the following table.
The bottom line is that EuroArea debt has now reached €12.26 trillion. If you include all 27 European Union countries, the total is €13.27 trillion. In both cases, the increases are roughly in line with inflation at around 3.8%. But, intriguingly, the percentage change varies a lot between countries. Debt levels for Czechia and Estonia both increased by over 20% and Romanian debt levels increased by 15.4%. We could perhaps congratulate Ireland and Cyprus and Sweden, who all actually managed to get their levels down. However, in the case of Sweden, it turns out that this is essentially due to changes in the Euro exchange rate - the debt levels measured in national currency units actually increased.
But the even more worrying information concerns the cost of paying interest on government debt. Eurozone interest payments have increased by over 25% to a whopping €226 billion. And the increase reaches 28% if we include all 27 countries in the European Union. For my own country, France, interest costs increased by 43.8% to reach nearly €50 billion. For Italy, the total was over €83 billion.
As I have argued for over 10 years, these payments make no sense. Our governments borrow money from the financial markets. For example, yesterday, the Agence France Tresor announced that they would be issuing an additional €6.488 billion in government bonds. Those bonds are purchased by the following primary dealers (the SVTs), who are the only entities able to purchase them.
- BANK OF AMERICA SECURITIES (BofA Securities Europe SA),
- BARCLAYS (Barclays Europe Plc),
- BNP PARIBAS (BNP Paribas SA),
- CITI (Citigroup Global Markets Europe AG),
- COMMERZBANK (Commerzbank AG),
- CRÉDIT AGRICOLE - CIB (Crédit agricole - CIB SA),
- DEUTSCHE BANK (Deutsche Bank AG),
- GOLDMAN SACHS (Goldman Sachs Bank Europe SE),
- HSBC (HSBC Continental Europe SA),
- JP MORGAN (J.P. Morgan SE),
- MORGAN STANLEY (Morgan Stanley Europe SE),
- NATIXIS (Natixis SA),
- NATWEST MARKETS (Natwest Markets NV),
- NOMURA (Nomura Financial Products Europe GmbH),
- SOCIÉTÉ GÉNÉRALE (Société générale SA).
And where do those banks get the money to buy the bonds? Well, they would like us to believe that they simply act as intermediaries for investors - people like you and me who have money to invest and think that government bonds are a safe bet.
But, in reality, those banks can simply create the "money" used to buy government bonds out of thin air. It's how money is created. And, since they can then sit back and "earn" the interest payments on the government debt and those interest rates are increasing rapidly, things are looking very good for the banks in the coming years.
Sure, the relatively low interest rates in recent years meant that the amount that Eurozone taxpayers were paying to the financial markets every year had dropped from nearly €300 billion a year in 2012 to a mere €172 billion in 2021. But the 25% increase last year makes it look like the banks will be able to cash in on their generosity with money creation over the last few years. Anyone like to predict what the figures will be for 2023?
If you look at the total amount of interest paid by taxpayers in the Eurozone since the Eurostat figures started in 1995, the amount is a staggering €7.197 trillion. That's around €20 000 for every man, woman and child in the Eurozone (there are 343 million of us). Personally, I think that money could have put to better use.