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Government finance statistics: deficit-debt relation

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Government finance statistics: deficit-debt relation

The financial accounts of the general government sector cover transactions in financial assets and liabilities as well as the stock of financial assets and liabilities.

The net lending (+) / net borrowing (-) (also known as surplus/deficit), together with the gross debt of the general government, are among the most important indicators in government finance statistics. 

Generally, the movement in government debt can be linked with the government balance: in case a deficit is observed, one would expect to see an increase in debt, and in case of a surplus, some of it could be used to repay debt. However, this is not necessarily the case. Deficits can also be financed by the sale of financial assets, or alternatively, debt can be raised to finance the acquisition of financial assets. Therefore, the evolution of quarterly debt is also linked to the net acquisition of financial assets. The incurrence of liabilities not covered in the definition of the general government gross debt (mainly ‘other accounts, payable’), as well as the valuation differences and discrepancies, also play a role in explaining the change in debt.

Source datasets: gov_10q_ggnfa, gov_10q_ggfa, gov_10q_ggdebt

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In the third quarter of 2025, the financing of the deficit (2.9% of quarterly GDP) explained the main part of the change in gross debt (4.5% of quarterly GDP) of the euro area. At the same time, the financing of the net acquisitions of financial assets (0.5% of GDP) and the repayment of liabilities not included in the general government gross debt (1.0% of GDP) also impacted the debt. Other differences between the change in debt and the deficit comprise notably certain revaluations of debt, adjustments between transactions and the change in stock at face value as well as discrepancies (0.1% of quarterly GDP). 

This information comes from data on quarterly government finance statistics published by Eurostat today. The article presents a handful of findings from the more detailed Statistics Explained article on government finance statistics – quarterly data.

In 2020 and 2021, due to COVID-19 containment measures and policy responses to mitigate the impact of those measures, the change in debt was mainly influenced by large deficits, as well as acquisitions of financial assets. 

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2 Awkward Talks to Have With Your Kids Before They’re 18 (Not ‘That’ One)

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2 Awkward Talks to Have With Your Kids Before They’re 18 (Not ‘That’ One)

As children reach adulthood, many parents assume they’ll still be able to step in when needed. In reality, that dynamic often changes quickly. Once a child turns 18, parents can lose both visibility and influence in ways they may not expect.

That’s why I suggest having two difficult conversations that can make a meaningful difference: The first helping your children build financial literacy, and the second ensuring you can support them effectively in a medical emergency.

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Fed’s Barr Warns Bank Deregulation Threatens Financial Stability | PYMNTS.com

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Fed’s Barr Warns Bank Deregulation Threatens Financial Stability | PYMNTS.com

Recent moves by the Federal Reserve and other banking regulators to weaken regulation and supervision of banks threaten to undermine the safety and soundness of the financial institutions and increase financial stability risks, Federal Reserve Gov. Michael S. Barr said in a recent speech.

Speaking Saturday (June 6) at American University in Washington, D.C., Barr pointed to what he described as decreases in capital requirements, lighter-touch bank supervision, a potential push for lower liquidity requirements and declines in consumer protection.

“Taken together, the regulatory and supervisory changes recently enacted or proposed represent the most significant deregulation of the banking system since the Global Financial Crisis,” Barr said. “They tip the imperative balance that must be maintained between openness and innovation, on the one hand, and safety and soundness, on the other, in a way that will increase the risks of financial instability.”

“I have voted against these changes, and I feel it is also my duty to continue to speak about them and explain that the costs they impose, in the form of risk, greatly outweigh the promised benefits of a lighter regulatory burden,” Barr said.

Barr also highlighted what he described as growing risks in the nonbank sector and said these risks require a strong banking sector.

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Some have argued that the banking sector should be deregulated so it can better compete with private credit and other nonbanks, but the sector needs improved regulation to protect banks from their exposure to nonbanks, Barr said.

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Banks are exposed to nonbanks through credit lines and asset-holding commonalities, he said.

“What all of this means is that we need strong banks at the core of the financial system to deal with shocks, including from nonbanks,” Barr said. “Dealing with those shocks requires robust capital and liquidity, and loosening bank regulatory standards moves in the opposite direction.”

“Bank deregulation can also lead to a race to the bottom,” Barr said. “If the goal is greater overall safety, it is perverse to relax safeguards. Deregulating banks so that they can better compete with nonbanks may lead to even more risk-taking by nonbanks. The answer is thus not to regulate banks less, but to regulate unsafe practices at nonbanks more.”

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Exclusive: U.S. bank regulators ramp up scrutiny of AI use at financial companies

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Exclusive: U.S. bank regulators ramp up scrutiny of AI use at financial companies
U.S. banking regulators are stepping up scrutiny of how lenders deploy artificial intelligence as the developing technology sweeps through the industry, pressing firms on everything from data access and governance controls ​to risks posed by third-party vendors, according to people familiar with the situation.
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