Seasonally adjusted government deficit at 3.2% of GDP in the euro area and EU – Euro indicators
As we enter the final quarter of 2025, attention turns to the evolving fiscal landscape of the euro area and the EU. Recent trends suggest an increasing government deficit to GDP ratio, reflecting shifting dynamics in revenue and expenditure that underscore the complexities of post-pandemic recovery.
As it stands in the European Area and EU General Government Deficit to GDP Ratio is at 3.2%.
Quick links: State of the economy | Growth, income and spending | Saving and investment | National differences | What changed | What to watch | What this means for you
This weekly briefing will explore these developments, providing critical insight into the economic momentum shaping our shared future.
The state of the economy this week
This week, data revealed a rise in government deficits as a percentage of GDP in both the euro area and the EU during the third quarter of 2025, indicating increasing fiscal pressures. Revenue slightly decreased in the euro area, while total expenditure rose significantly, highlighting a growing imbalance.
Overall, these trends suggest heightened economic strain, requiring closer scrutiny of fiscal policies in response to expanding deficits.
Growth, income and spending
In the third quarter of 2025, both the euro area (EA20) and the EU registered a deficit to GDP ratio of 3.2%, an increase from 2.8% and 2.9% respectively in the previous quarter. This reflects a growing discrepancy between revenue and expenditure.
Government revenue in the euro area decreased slightly to 46.7% of GDP, down from 46.8%. However, this was accompanied by an increase of roughly €13 billion in absolute terms, overshadowed by an expanding GDP. In contrast, total expenditure rose to 49.9% of GDP, up from 49.5%, due to a €32 billion increase in spending.
For the EU, government revenue remained stable at 46.3% of GDP, while total expenditure increased to 49.5%, up from 49.2%. Here, revenues increased by about €25 billion, with expenditures rising by approximately €39 billion compared to the previous quarter.
Overall, these trends indicate rising fiscal pressures amid fluctuating government revenues and heightened expenditures across both regions.
Saving and investment behaviour
In the third quarter of 2025, both the euro area and the EU experienced an increase in deficit to GDP ratios, with the euro area rising to 3.2% from 2.8% and the EU increasing to 3.2% from 2.9%. Government total revenue in the euro area decreased slightly to 46.7% of GDP, while total expenditure increased to 49.9% of GDP.
Conversely, in the EU, total revenue remained unchanged at 46.3% of GDP, and total expenditure rose to 49.5% of GDP. The euro area’s slight reduction in revenue was attributed to GDP growth outpacing an absolute revenue increase, while both areas saw substantial increases in absolute government expenditure.
Diverging national patterns
In the third quarter of 2025, the fiscal landscape in the euro area (EA20) and the broader European Union (EU) exhibits notable divergences, particularly in their government deficit ratios relative to GDP. Both regions experienced an increase in their deficit ratios from the previous quarter; however, the euro area’s deficit rose to 3.2%, compared to the EU’s slightly lower figure, reflecting different fiscal dynamics and pressures across member states.
Government revenue also diverged, with the euro area recording 46.7% of GDP—a slight decrease from 46.8%—while the EU held steady at 46.3%. This suggests that while the euro area faced minor contraction in revenue generation amidst rising GDP, the EU managed to maintain its revenue levels, pointing to varied economic responses or recovery trajectories among member states.
Expenditure patterns further illustrate this divergence, as the euro area’s government spending escalated to 49.9% of GDP, contrasting with the EU’s 49.5%. The euro area’s spending growth, driven by an increase of around €32 billion, outpaced revenue adjustments, highlighting a potential imbalance in fiscal management within the eurozone compared to the EU, which saw a more controlled increase in spending.
Overall, these figures underscore distinct fiscal strategies and economic conditions among the countries within the euro area compared to those in the wider EU, hinting at varying challenges and policy responses in managing government finances across Europe in the wake of recent economic pressures, including the lingering effects of COVID-19 and energy price fluctuations.
What changed since last week
Key Updates in Q3 2025 Financial Data
Deficit to GDP Ratio Increase:
- Euro Area (EA20) and EU deficit to GDP ratios both rose to 3.2% from 2.8% and 2.9% respectively in Q2 2025.
Government Total Revenue:
- In the Euro Area, total revenue decreased slightly to 46.7% of GDP, down from 46.8%, despite an absolute increase of around €13 billion, primarily due to a larger GDP increase.
- The EU’s total revenue remained stable at 46.3% of GDP with an increase of around €25 billion.
Government Total Expenditure:
- Euro Area expenditure rose to 49.9% of GDP from 49.5%, reflecting an increase in absolute terms of about €32 billion.
- The EU’s expenditure also increased to 49.5% of GDP from 49.2%, with an increase of around €39 billion.
These changes reflect a broader economic trend in the Euro Area and EU, highlighting shifts in fiscal positions and the impact of GDP variations on revenue and expenditure ratios.
What to watch next
Upcoming Economic Data and Scheduled Updates
- Annual Excessive Deficit Procedure (EDP) Data: Next publication scheduled for April 2026.
This data represents a thorough verification by Eurostat of the general government deficit/surplus as used in the context of the EDP.
- Quarterly Government Finance Statistics: All quarterly data for the first three quarters of 2025 are labeled as provisional.
These include updates on total revenue and total expenditure in the euro area and EU.
For any further data releases or updates, please refer to Eurostat’s official announcements.
TL:DR
- In Q3 2025, the general government deficit to GDP ratio rose to 3.2% in both the euro area and the EU, up from previous quarters.
- Euro area government revenue decreased slightly to 46.7% of GDP, despite an increase in total revenue by €13 billion.
- Total government expenditure in the euro area increased to 49.9% of GDP, a rise attributed to a €32 billion increase.
- In the EU, government revenue remained stable at 46.3%, while expenditure increased to 49.5% of GDP.
What this means for you
At a practical level, a government deficit of 3.2% of GDP means governments are still relying on borrowing to fund day-to-day spending. For households, this does not usually lead to immediate changes, but it helps explain why borrowing costs may stay higher for longer: interest rates on mortgages, loans and credit cards are less likely to fall quickly if public finances remain stretched.
For businesses, sustained deficits can influence access to credit and investment conditions. Banks may remain cautious, particularly for smaller firms, while governments facing tighter budgets may delay infrastructure projects or scale back support schemes. Over time, this can affect hiring plans, investment decisions, and the pace at which supply chains and inventories normalise.