Sovereign debt is nothing more than state’s public debt or the government debt as defined by
. Public debt is the result of public
loans and includes all monetary liabilities
incurred through domestic and foreign loans on behalf of the State or guaranteed by the State. The
general theory of public credit refers to notions and concepts relating to the need, usefulness and
role of funds obtained by credit, the public debt main forms and derivatives, ordinary and
extraordinary contracting, extinguishment and issuing methods concerning the public credit
With regard to the level of public debt, according to the criteria for joining the euro zone, the
States that want to adopt, or have already adopted the euro, must meet certain budgetary
- Government deficit must not exceed 3% of GDP;
- Low inflation rate, according to the European average (generally up to 3%);
- Government debt must not exceed 60% of GDP.
Before launching the Euro, many countries exceeded this figure, but Italy and Belgium stood
out as each had a debt of over 100% of GDP
. These countries have committed themselves to make
efforts to stabilize and reduce government public debt through very restrictive fiscal policies in
Unfortunately, this goal was not achieved either at law or in practice. Since EU law is directly
applicable within the national law of Member States, these countries would have been practically
bound to meet the criteria for accession to the euro.
We believe that between Community law and the national law in the Member States euro zone
should be a correlation as regards the compliance with the budgetary convergence criteria, precisely
to obviate sovereign debt crises. In time, subsequent to adopting the euro and until present time, this
mismatch has led to the overgrowth of public debt of many European Union Member States.
The Greek government's debt is about 160% of gross domestic product (GDP) and the country
faces bankruptcy. Although Greece has a low economy in terms of volume and possible damage to
the euro zone could be covered, the risk of this country’s collapse takes into account the contagion
or chain reaction phenomenon.
Other countries with high levels of debt are: Italy, with a government debt of 120% of GDP,
Republic of Ireland with 112% of GDP, Portugal with 102% of GDP, Belgium with 97% of GDP,
difficult situations being found also in Spain and Hungary.
These countries main lender, Germany, is exposed to foreign government debt and may be
affected if one of the biggest debtors goes into payment default.
2. European legislative action against government debt.
The main aspects of the public debt crisis take into account the exacerbation of tensions in
sovereign debt markets, which has exerted increasing pressure on the banks in the European Union
and loss of investor confidence in the credit instruments. The link between public debt and private
banks is obvious, as the States have attended the course of rapid and short-term loans from private
Considering these issues, in 2008-2009, the European Commission adopted special rules on the
State aid to allow EU Member States to support the banking system during the financial crisis and
maintain financial stability, taking care to avoid undue Single Market competition imbalances.
See a rt. 3 of GEO no. 64/2007 on public debt, published in the Official Journal, Part I, nr.439/29 Jun. 2007, as
subsequently amended and supplemented.
See I. Gliga, Drept financiar (Financial Law), Humanita s Publishing House, Bucharest, p. 352
See J. Gaston , Cours de finances publiques, M. Giard, Paris, 1929, p. 191 et seq.
The so-called 1992 Maastricht criteria
See A. Brociner, Europa monetară. SME, UEM, moneda unică (European currency. EMS, EM U, single
currency), The European Institute, Bucharest, p. 34.