Eurozone budget deficit falls to 3.1% in 2024, imbalances remain

In 2024, the Eurozone recorded a reduced government budget deficit relative to gross domestic product (GDP), falling to 3.1% from a revised 3.5% in 2023. The improvement reflects a combination of stronger fiscal revenues and moderate expenditure control across the 20-member bloc. Despite the overall decline, fiscal pressures remain unevenly distributed, with twelve countries still posting deficits equal to or exceeding the European Union’s recommended limit of 3% of GDP.

According to recent data from Eurostat, only six member states posted a budget surplus or maintained their deficits below the 3% threshold. Denmark led with a surplus of 4.5% of GDP, followed closely by Ireland and Cyprus at 4.3% each. Greece, Luxembourg, and Portugal also reported surpluses or modest fiscal positions, underscoring efforts by some governments to consolidate public finances after years of pandemic-related spending.

In contrast, several larger economies continued to struggle with significant budgetary gaps. Romania posted the largest deficit at 9.3% of GDP, followed by Poland at 6.6%, France at 5.8%, and Slovakia at 5.3%. These levels far exceed the Stability and Growth Pact criteria, raising concerns about the medium-term sustainability of public finances in these countries.

The overall government expenditure in the Eurozone reached 49.6% of GDP in 2024, up from 48.9% in 2023. The increase was largely driven by continued public investment, social spending, and efforts to mitigate the effects of inflation on households and businesses. Meanwhile, government revenues also rose to 46.5% of GDP, supported by higher tax receipts, strong labour market performance, and a rebound in corporate earnings in several countries.

Analysts note that the narrowing of the deficit at the Eurozone level is a positive signal, but the divergent trends among member states highlight challenges in fiscal coordination. With economic growth slowing and uncertainty surrounding global trade and geopolitical risks, governments may face increased pressure to balance support for economic activity with fiscal discipline.