Manual on Government Deficit and Debt: Implementation of ESA 2010

The Eurostat 2016 version on 'Government deficit and debt'.

Key concepts for measuring government deficit and debt:

ESA 2010 is a system for producing macro-economic statistics. As such, it records the economic reality of transactions rather than their legal form. This can involve looking through complex financial operations to understand who bears the financial risks and who has control over the rewards, irrespective of how the contracts have been constructed. In the context of measuring government deficit and debt, this search for the economic reality affects such matters as the following.

• The classification of units: is a unit included in the government sector or not? The government deficit and debt are primarily affected by units classified to the government sector. This is determined by considering whether or not a unit is controlled by government and whether it is a non-market or market (financed mainly by its own sales) unit. Privately controlled market institutional units are not included in the government sector.

• The timing of transactions: ESA 2010 records transactions on an accrual basis, i.e. when the economic activity takes place, rather than when the cash is paid. Such differences may be large, and therefore significant for the government deficit/surplus.

• The nature of a transaction: ESA 2010 distinguishes non-financial transactions such as consumption, wages and salary, subsidies or grants to cover losses, which directly affect the government deficit; and financial transactions as e.g. the acquisition of financial assets or the repayment of debts, which do not.