Government deficit within the eurozone decreased last year but government debt nevertheless increased as a proportion of GDP, with Malta following the general trend.

Eurostat figures show that the eurozone’s deficit to GDP ratio decreased from 6.2% in 2010 to 4.1% in 2011, while that of the EU fell from 6.5% to 4.5%. But the debt to GDP ratio rose from 85.3% to 87.2% within the eurozone and from 80% to 82.5% within the EU.

Malta followed the same trend: Its fiscal deficit fell from 3.7% to 2.7% of GDP while its debt rose from 69.4% to 72%.

The eurozone’s 87.2% debt-to-GDP ratio is the highest level registered since the euro was created in 1999.

According to the so-called ‘Maastricht criteria’, eurozone members should ensure that their deficit does not exceed 3% of GDP, and that their debt does not exceed 60% of GDP.

But only three – Estonia, Finland and Luxembourg – of the 17 eurozone members satisfy both criteria: Slovakia and Slovenia meet the debt criterion while Malta, Austria and Germany satisfy the deficit requirements. Outside of the eurozone, Bulgaria, Denmark and Sweden also meet the Maastricht criteria, as far as government finances are concerned.

The greatest proportional reduction of deficit occurred in Ireland, which had registered a record deficit-to-GDP ratio of 31.2% in 2010. But last year’s 13.1% ratio still remains, by far, the highest in the EU, although it is expected to fall further this year, and Irish debt amounted to 108.2% of GDP last year.

Ireland’s finance ministry stuck to a 9.4% deficit figure, stating that Eurostat’s figure was due to a technical reclassification of assets. But Eurostat had expressed reservations about Irish data, and explained that the discrepancy was due to a government injection for the restructuring of two Irish banks, restructuring plans which still need to be finalised and approved by the EU.

A notable improvement in fiscal balance also occurred in Hungary, which registered a 4.2% deficit in 2010 and a 4.3% surplus the following year.

The fiscal balance actually worsened in two countries – Cyprus and Slovenia. It remained stable in Sweden, which nevertheless recorded a 0.3% surplus.

Only three countries registered a surplus, with Estonia rounding up the lot.

Estonia was the best-performing EU member as far as public finances are concerned last year, having registered a surplus of 1% of GDP and with debts amounting to just 6% of GDP. It is also one of just six EU members which have managed to reduce their debt-to-GDP ratio, along with Germany, Hungary, Latvia, Luxembourg and Sweden.

The largest increase in debt – from 145 to 165.3% of GDP – occurred in Greece, even as its deficit fell from 10.3% to 9.1% following a series of unpopular austerity measures.

So far, Greece, Ireland and Portugal have received an EU bailout over the state of their public finances. Portugal is in a somewhat better shape: Its deficit-to-GDP ratio fell from 9.8% to 4.2% last year, although its debt increased from 93.3% to 107.8% of GDP.

Concerns persist over the public finances of Spain and Italy – which may both be too large to receive EU bailouts should they need help.

In Spain’s case, the most pressing matter is its high deficit – 8.5% of GDP: its public debt is relatively low at 68.5%, although it has been increasing sharply. The opposite is true in Italy, which registered a deficit-to-GDP ratio of 3.9% but whose debt, at 120.1% of GDP, is verging on the unsustainable.