Does European Monetary Union Increase Government Debt/GDP of Countries? Preliminary Statistical Evidence

The goal of this study is to analyze the evolution of government gross debt as a % of the GDP and government deficit as a % of the GDP across European countries. In particular, this study compares the evolution of government gross debt as a % of the GDP of European countries within and outside European Monetary Unification, before and after the introduction of Euro currency in 2002. Statistical evidence shows that the dynamics of government gross debt is significantly different between countries within and outside European Monetary Unification. In particular, results suggest that economic policy of European Union (E.U.), combined with European Monetary Unification, is deteriorating and increasing – in average – sovereign debts and fiscal deficits of countries within European Monetary Unification in comparison to countries outside European Monetary Unification. This different evolution of government gross debt and government deficit as a % of the GDP between European countries can be due to manifold factors. Overall, then, the different patterns of government gross debt as a % of the GDP across European countries may be one of contributing factors that generates, in a context of environmental turbulence, negative socioeconomic effects on E.U. economy as a whole and future economic growth