29 Apr 2017

Eurozone Public Sector Debt and Interest payments 1995-2016

Here I provide more details of the way Eurozone Public Sector debt has soared since 1995, and the extent to which increases in debt relate to the interest payments that we have been forced to pay. The full set of data can be found in a Google Sheet File that you can download and consult freely. All the numbers come from the latest set of figures from the EuroStat office.

First hes is a graph of how debt has increased by over 135% since 1995, from €4.07 trillion to €9.59 trillion at the end of 2016.

Now let's look at the figures in detail.

Debt has increased by €5,518,180 million, corresponding to an average increase of around €263 billion a year.

In the same period, Eurozone taxpayers have paid almost €6 trillion in interest on that debt - an average of over €280 billion a year. The figure is amazingly constant, with a peak value of €318 billion in 1996, and a minimum of €246 billion in 2004 and 2005. This contancy is despite an almost continuous drop in the effective interest rate, from 7.37% in 1995 to a "mere" 2.46% in 2016.

But that "mere" 2.46% level, helped no doubt by the massive purchasing of government bonds by the ECB, has not appreciably reduced the drain on Eurozone taxpayers. Despite Mario Draghi's efforts, we still forkd out over €236 billion in interest last year - corresponding to 2.2% of the Eurozone's GDP.

Over the whole period, an average of 3.4% of the Eurozone's GDP has been used to pay interest charges on Public Sector Debt. Given that roughly 19% of Eurozone GDP is taken in tax, this means that roughly 18% of all taxes in the Eurozone gets used to pay interest charges.

Where does all that money go? Well, to start with, you have to realize that only selected players are allowed to buy Eurozone government bonds - and those players are essentially all commercial banks. They are thus the ones that are first in line to benefit from all that taxpayers money.

And where do the banks get the money they use to buy government bonds? Well, they would no doubt like us all to believe that they are just acting as intermediaries for armies of grannies who want to use their savings to buy safe government bonds.

But this image is, in my humble opinion, a complete myth. When Commercial banks want to buy government bonds, they can just invent the "money" they use out of thin air. They can then sit back and cash in the taxpayers money that is being siphoned out of the economy. Alternatively, they can flog the bonds to third parties that include US and Canadian Pension Funds.

Whoever benefits from the money, it seems very likely that  roughly €6 trillion of Eurozone Taxpayers money could have been used for much more useful purposes.

There is thus a very strong case for completely scrapping the current insane system in which our governments are forced to borrow from commecial banks with the result that we are effectively all slaves to the financial system. That system was made binding by the treaties of Maastrict and Lisbon, but desperately needs to be overturned.

What is needed is a system where the European Central Bank can provide funds to Governments directly, preferably with no interest charges to pay. Or even better, Governments could simply create their own debt free money as with the N-Euro scheme that I have been proposing.

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