Picture: Sandra Kelley / youthmedia.eu

A piggy bank: it is good to have. Some states, however, could not use one - they are terrible at saving money.

Imagine the Christmas presents you unwrapped some weeks ago were bought on credit, and imagine the person who gave them to you in fact mostly lived on credit. If she mired in debt so deep that she could not buy herself out with all she earns in a year, then this might already be worrying and you might want to seek a talk with her about her spendthrift habits. If it then turns out that she actually earned quite a lot during the last couple of years, then the situation might not only seem worrisome but puzzling. This, however, is roughly the situation the states in Europe have managed to get themselves into. It's a myth that Europe's states are in a state of affluence. Indeed, they are in trouble.

The situation cannot be compared to the situation of the many African states which are caught in a poverty trap; the problem is different but it nevertheless exists. And even if it does not fully apply to all countries in Europe, still, all are affected. The countries bound together in the Eurozone suffer strongly when some economies plunge or dwindle, but all the other European countries are also closely intertwined by trade so that every crisis is a shared crisis, regardless of whether the problem

The state of debt

This is the figure: minus 7,700,000 million Euro. This is the price tag of the past, the amount of money the EU27 governments spent which they did not have. This practice itself is not deplorable, not at all: public spending on credit can increase the freedom of a government to act and it can provide for very sensible policies such as economic stimulus measures. But every government must consider what it spends the credit money on and how much credit it takes up. The issue at hand here is the latter, it is also called the problem of structural deficit.

In order to put this absolute amount of debt in proper perspective, economists measure it in terms of how it relates to the national production. The Eurozone for example agreed that the pile of national debt must not exceed 60 percent of the value that is produced by that national economy in a year (the GDP).

Picture: Julia Bach / youthmedia.eu

Debt today means: portions will be smaller in the future.

This year European countries broke their post-war debt record. France's and Hungary's debt amounts to about 70 percent of their GDP, Belgium is 90 percent in debt and Italy's debt is even higher than the value of what is produced in Italy in one year. The eastern countries, however, tend to have obtained a better position with Slovenia and Latvia at about 20 percent and Lithuania, Romania and Bulgaria at about 15 percent. However, an excessive deficit procedure was commenced by the commission because they exceeded the level for new deficit per year.

A reason for pessimism: Failure to get out of debt

Of course the economic crisis contributed its share to this fact but the problems stem from the time before that. The prime culprit recently has been Greece, where government debt is as high as the value of all the goods that were produced in Greece in one year. This has a tradition: it has been the same picture since at least 1996. The country failed to get out of debt even in the time of economic upswing, when tax revenues rose and government spending decreased because fewer people were unemployed and receiving public support. Because the deficit is growing larger over time due to interest payments, it requires rigorous commitment to diminish it. Times of economic upswing are a chance to pay back the loans, however the coutries let it pass. It is not only Greece that failed to do so - politicians in the UK, Germany and France also contributed to this general malfunction of public finances. During the last 25 years the UK managed to reduce its debt twelve times, Germany only six times and France only five times.

There are no indications that the countries have learned their lesson. The Commission's excessive deficit procedure, which is supposed to punish countries with spendthrift tendencies, has never yielded any fines nor any results. So when Greece prime minister, Giorgios Papandreou, announced that his country would become a rigorous miser, no one believed him. At least the banks did not. Greece's credit reliability is now the first in the EU to be marked at a second class B-Level. Consequently, the country has to pay a higher interest rate, which makes the task of getting out of debt even harder.

Greece probably won't be the last to receive this mark B in credit reliability, the outlooks rather confirm pessimists. The OECD estimates that the average level of public debt will rise from 70 to 90 percent of the value of national production by 2011. Now that public spending is going through the roof it seems to be just a matter of time before banks will systematically demand higher interests rates because they're losing trust in governments. This will gradually decrease the possibilities of governments to finance their policies.

However, stating that Europe's states are in trouble was not quite precise. Indeed we, the younger generations, are the ones who are in trouble. People before us granted unduly opulent Christmas presents to themselves and bestowed an unduly large fiscal legacy on us.